OBLIGATION – juridical necessity to give, to a.

Performance
do or not to do b. Damages
2. Generic
4 ELEMENTS OF OBLIGATION a. Performance
1. ACTIVE SUBJECT (creditor/obligee) – b. Damages
whose obligation is constituted c. Obligation be complied at debtor’s
2. PASSIVE SUBJECT (debtor/obligor) – has expense
duty to give, to do or not to do
3. OBJECT/PRESTATION – subject matter Creditor’s rights if debtor does in
4. JURIDICAL/LEGAL TIE (vinculum/efficient contravention
cause) – reason 1. Damages
2. Ask it be UNDONE at debtor’s expense
CIVIL OBLIGATION NATURAL
OBLIGATION FORTUITOUS EVENT – cannot be foreseen, if
derived from derived from equity foreseen, inevitable
positive law & justice General Rule: No person liable to fortuitous
enforceable by not enforceable by event.
court action court action Exceptions:
1. Law states
5 SOURCES OF OBLIGATION 2. Stipulation/contract states
1. LAW 3. Assumption of risk
2. CONTRACTS 4. Delay
3. QUASI-CONTRACTS – arise from lawful, 5. Debtor promises deliver to 2/more
voluntary acts; no one shall be unjustly persons who do not have same interest (bad
enriched... faith)
     2Kinds
     a. Solutio indebiti – something received EFFECTS OF FORTUITOUS EVENT to thing
(delivered on a mistake), no right to demand to be delivered
it - extinguish the obligation if determinate;
     b. Negotiorum gestio – voluntary mgt of generic does not extinguish the obligation
property/affairs of another w/o his
knowledge/consent
4. QUASI-DELICT/TORTS/CULPA AQUILIANA –
arise from damage; fault/negligence
5. CRIMES/ACTS/OMISSIONS punished by 3 MISCELLANEOUS RULES ON
law – arise from civil liability that is a PERFORMANCE OF OBLIGA-TION
consequence of a criminal offense 1. When to
deliver determinate, accessions (additions/
DILIGENCE OF A GOOD FATHER OF A improvements)
FAMILY and accessories(joined/included with the
- care need to be exercised by a debtor to principal) are INCLUDED even not
deliver/give determinate thing mentioned.
Exception: When law/stipulation of parties 2. If debtor fails to do, it shall be DONE AT
requires a differnt standard of care HIS EXPENSE, same with doing the
(slight/extraordinary diligence). contravention; poorly done be undone.
3. In obligation not to do, and obligor does
When creditor is entitled to the fruits what is forbidden, shall be UNDONE AT HIS
Rule: The creditor has personal right (right EXPENSE.
to ask for delivery) from the time the
obligation to deliver arises. 4 GROUNDS; debtor liable for damages
But NO real right (right enforceable against 1. Default/mora
the whole world) until it is delivered. 2. Fraud/dolo
3. Negligence/culpa
3 KINDS OF FRUITS 4. Contrary to terms of obligation
1. NATURAL – w/o human intervention
2. INDUSTRIAL – w/ human intervention 1. DEFAULT/MORA – delay
3. CIVIL – derived by virtue of juridical      3kinds
relation      a. Mora solvendi – debtor’s delay to give
(real ob.), to do (personal ob.)
Creditor’s rights if debtor fails to comply      b. Mora accipiende – creditor’s delay to
w/ the obligation accept
1. Determinate      c. Compensatio Morae – delay of both in
reciprocal obligation
CONCEPT OF DELAY
General Rule: No demand, No delay
Exceptions:
1. Law states
2. Obligation states 10 Kinds of Obligation
3. Time is the essence 1. Pure
4. Demand be useless if delay 2. Conditional
5. Debtor guilty of delay 3. Alternative
4. Facultative
EFFECTS OF DELAY 5. Joint
1. Damages 6. Solidary
2. When to deliver determinate thing, STILL 7. Divisible
LIABLE in fortuitous event. 8. Indivisible
9. Obligation w/ a period
2. FRAUD/DOLO – conscious, deliberate, 10. Obligation w/ a penal clause
intentional evasion of fulfillment
     2Kinds 1. PURE OBLIGATION
     a. Dolo causante/Causal fraud – fraud in - w/o condition, demandable at once (pure
obtaining consent; consent is defective, has resolutory condition/period)
contract is voidable. Remedy: annulment
     b. Dolo incidente/Incidental fraud – fraud 2. CONDITIONAL OBLIGATION
w/c vitiates consent. Remedy: damages - there is condition in performance; future &
uncertain
3. NEGLIGENCE/CULPA – voluntary      2Kinds
act/omission; no bad faith intended      a. Suspensive condition – happening of
     3Kinds condition gives RISE to obligation
     a. Culpa aquiliana/Civil negligence –      b. Resolutory condition – happening of
quasi-delict/torts condition EXTINGUISHES obligation
     b. Culpa contractual/Contractual
negligence – breach 6 MISCELLANEOUS RULES ON CONDITIONAL
     c. Culpa criminal/Criminal negligence – OBLIGATION
crime/delict 1. Impossible conditions, contrary to law,
shall ANNUL obligation.
4. Contrary to the terms of obligation 2. The condition not to do an impossible
thing is considered not agreed upon.
2 RULES OF PRINCIPAL & INSTALLMENT 3. The condition that happens in
1. Receipt of principal w/o mention of determinate time, EXTINGUISHES obligation.
interest, presumed interest is paid also. 4. The condition that happens in
2. Receipt of latter installment w/o mention INDETERMINATE time, obligation only
of prior installment, presumed prior effective at arrival.
installment is paid also. 5. The condition is fulfilled if DEBTOR
prevents fulfillment.
4 SUCCESSIVE RIGHTS OF CREDITOR to 6. The effect of conditional obligation, once
satisfy claim against DEBTOR fulfilled:
1. Exact payment - to give: retroact to the day of constitution
2. Attach debtor’s properties of obligation
3. Accion subrogatoria – exercise rights & - has reciprocal prestations: fruits &
actions except inherent in person interests be mutually compensated
4. Accion pauliana – cancel acts/contracts by - has unilateral obligation: debtor shall give
debtor to defraud creditor fruits & interests

TRANSMISSIBILITY OF RIGHTS RULES in case of Loss, Improvement, or

General Rule: ALL RIGHTS are transmissible. Deterioration of thing during the pendency
Exceptions: of condition
1. Law states 1. LOST
2. Contract states a. w/ debtor’s fault – damages
3. Obligation is purely personal b. w/o debtor’s fault – extinguishes
obligation

2. DETERIORATION
a. w/ debtor’s fault  - (1) cancel obligation 1. Little by little
& damages; or (2) fulfill obligation w/ 2. In partial payment
damages 3. Payable ASAP
b. w/o debtor’s fault – creditor suffer 4. When I can afford it
impairment 5. When I have the money
6. When I am able to
3. IMPROVEMENT 7. When my means permit me to do so
a. By nature/time – benefit to creditor
b. at expense of debtor – debtor no right PERIOD CONDITION
than that granted to usufructuary (debtor no certain uncertain
right to compensate amount for future only future/past but
improvement) unknown
(*influence upon (*) on the very
EFFECTS OF FULFILLMENT OF SUSPENSIVE obligation) only existence of
CONDITION upon its obligation itself
General Rule: The obligation becomes demandability
effective retroactively to the day obligation
was constituted. FOR WHOSE BENEFIT IS THE PERIOD?
Exceptions: General Rule: Both the debtor & creditor.
1. In reciprocal obligation, fruits & interests Therefore, NEITHER of them can demand
during pendency of condition shall performance of obligation.
compensate each other. Exception: If the term of obligation has to
2. In unilateral obligation, debtor gets fruits favor one of them.
& interests unless there is a contrary intent.
5 INSTANCES WHEN DEBTOR LOSES RIGHT
3 EFFECTS OF FULFILLMENT OF TO USE “PERIOD”
RESOLUTORY CONDITION 1. Debtor is insolvent.
1. Extinguish obligation. 2. Debtor attempts to abscond.
2. Both parties restore what they received 3. Impairment of guarantees/securities.
plus fruits & interests. 4. Failure to furnish guarantees/securities
3. The rule on L, D, or I will apply to person promised.
who has to return the thing. 5. Violation of undertaking.
When one of debtors in reciprocal
obligation does not comply w/ his 4. ALTERNATIVE OBLIGATION
obligation - w/ 2 or more prestations, only 1 is due.
1. The right of injured party is (1) cancel
contract & damages; or (2) fulfill obligation 5. FACULTATIVE OBLIGATION
& damages - w/ ONLY 1 prestation but can be
substituted.
3 Kinds of Obligation (Accdng to PERSON
OBLIGED)
1. UNILATERAL – only 1 party obliged to ALTERNATIVE prestations LOST w/ debtor’s
comply fault
2. BILATERAL – both parties; performance Creditor entitled to damages but needs ff
not same time requisites:
3. RECIPROCAL – both parties; performance 1. Debtor can choose.
same time 2. All prestations lost/become impossible
due to debtor’s fault.

ALTERNATIVE FACULTATIVE
OBLIGATION OBLIGATION
3. OBLIGATION W/ A PERIOD several prestations one prestation due,
- demandability/extinguishment subject to due, giving one is but can be
the expiration of period sufficient subtituted
right to choose right to choose
PERIOD – interval of time; either suspends (debtor) unless DEBTOR ONLY
demandability or produces extinguishment granted to creditor
If 1 of the nullity of principal
DAY CERTAIN – must come, not known when prestation is illegal, carries w/ it nullity
others may be of accessory/
7 CASES CONSIDERED TO BE “OBLIGATION valid, obligation substitute
W/ A PERIOD” remains
 loss/impossibility of loss/impossibility of
ALL prestations presta-tion due, 9. INDIVISIBLE OBLIGATION
due, w/o debtor’s w/o debtor’s fault, - prestation incapable of partial performance
fault, extinguishes extinguishes
obligation obligation 10. OBLIGATION W/ A PENAL CLAUSE
- one w/ accessory undertaking attached to
(3) SUMMARY OF RULES, OBLIGATIONS, & obligation to assume greater liablity in case
RIGHTS OF DEBTOR IN ALTERNATIVE of breach/non-fulfillment of obligation
OBLIGATION
1. If 1 of prestations lost through fortuitous 3 PURPOSES OF PENAL CLAUSE
event, shall still be perform by choosing 1. Ensure performance of obligation
(creditor) from the remainder. 2. Substitute for damages & interest in case
2. If 1 of prestations lost through debtor’s of noncompli-ance
fault, creditor may claim any of remainders 3. Penalize debtor in case of breach
w/ damages.
3. If ALL prestations lost through debtor’s In case obligation has a PENAL CLAUSE
fault, creditor choose price w/ damages. General Rule: Penalty takes the place of
damages & interest in case of non-
RULES on LOSS/DETERIORATION of the compliance.
thing intended as SUBSTITUTE in Exceptions:
FACULTATIVE OBLIGATION 1. Stipulation states.
1. If there is a loss/deterioration of thing 2. Debtor refuse to pay penalty.
intended as substitute, debtor is NOT liable 3. Debtor guilty of fraud in performance of
if NOT HIS FAULT. obligation.
But if substitution is already made, debtor is
liable for loss of substitute when in DELAY, NULLITY OF PRINCIPAL OBLIGATION OR
NEGLIGENCE, or FRAUD. THE PENAL CLAUSE
Nullity of principal obligation = nullity of
6. JOINT OBLIGATION penal clause
- obligation is to be paid proportionately by Nullity of penal clause = NOT nullity of
debtors or to be principal obligation
demanded proportionately by creditors
10 MODES OF EXTINGUISHMENT OF
7. SOLIDARY OBLIGATION OBLIGATIONS
- each one of debtors has right to render or 1. Payment or performance
each one of creditors has right to demand 2. Prescription
the entire compliance w/ prestation 3. Compensation
4. Confusion/merger
MAXIMS & SYNONYMS 5. Condonation/remission
MAXIMS SYNONYMS 6. Fulfillment of resolutory condition
JOINT “To each Proportionate 7. Annulment
Obligation his own” 8. Rescission
9. Novation
SOLIDARY “One for individually &
10. Loss of thing due
Obligation all, all for collectively
one”
1. PAYMENT/PERFORMANCE
- Payment means delivery of money &
(3) SOLIDARY OBLIGATION EXIST ONLY IF:
performance of obligation
*RULES
1. Law states
2 PLACE OF PAYMENT
2. Stipulation states
1. At place agreed upon
3. Nature of obligation requires
2. If w/o agreement
a. Object is indeterminate – paid at domicile
2 PRESUMPTIONS THAT OBLIGATION IS
of DEBTOR
JOINT
b. Object is determinate – place of thing at
1. The debts be divided as many shares as
the time of constitution of obligation
there are debtors/creditors.
2. The debtors/creditors are distinct from
one another.

8. DIVISIBLE OBLIGATION
- prestation is capable of partial
4 SPECIAL MODES OF PAYMENT
performance
a. Application of payment
b. Cession partial/total insol- during solvency of
c. Tender of payment & consignation vency debtor
d. Dacion in payment
d. TENDER OF PAYMENT & CONSIGNATION
a. APPLICATION OF PAYMENT TENDER OF PAYMENT – act of offering the
- designation of debt to w/c payment must creditor what is due to him w/ a demand
be applied when debtor has several that the creditor accept it
obligations of same kind in favor of same CONSIGNATION – act of depositing thing due
creditor. w/ the court when creditor cannot/refuses
acceptance of payment
3 REQUISITES OF APPLICATION OF
PAYMENT 5 REQUISITES OF CONSIGNATION
1. Only 1 debtor & 1 creditor 1. Debt due.
2. 2 or more debts, same kind 2. Creditor refused the tender of payment
3. All debts are due w/o just cause
4. Insufficient payment to exinguish ALL 3. Notice of consignation  already given to
debts persons interested in fulfillment of
obligation
3 RIGHTS TO MAKE APPLICATION OF 4. Consignation of thing/amount due
PAYMENT 5. Subsequent notice of consignation to
1. Right belongs to CREDITOR. interested persons
2. If debtor does not avail, creditor can give
him receipt designating the debt from which 5 VALID CONSIGNATION W/O PREVIOUS
payment will be applied. TENDER OF PAYMENT
3. If debtor accepts the receipt, he cannot 1. Creditor is absent/unknown.
complain unless THERE IS just cause to 2. Creditor is incapacitate to receive at time
invalidate the contract. it is due.
3. Creditor refused give a receipt, w/o just
b. CESSION cause.
- debtor abandons ALL his property for 4. 2 or more persons claim the right to
creditor’s benefit to obtain payment from collect.
proceeds of his property 5. Title of obligation lost.

5 REQUISITES OF VALID CESSION

1. 1 debtor & 2 or more creditors
2. Debtor is in partial/total insolvency.
3. Debtor to deliver ALL his property to
creditors 2. LOSS OF THING DUE
4. Debt is due & demandable. - perishes, disappears, or goes out of
5. Creditors must sell the properties & apply commerce; existence is unknown; cannot be
the proceeds to their respective credits recovered
proportionately.
3 REQUISITES TO EXTINGUISH OBLIGATION
c. DACION IN PAYMENT (dacion en pago) DUE TO LOSS
- alienation of property to the creditor in 1. Determinate thing.
satisfaction of debt 2. W/o debtor’s fault.
3. No delay.
3 REQUISITES OF DACION IN PAYMENT
1. Consent of creditor
2. NOT prejudicial to another creditor 3. CONDONATION/REMISSION
3. Debtor not insolvent declared by a - gratuitous abandonment of right by the
judicial decree creditor

CESSION DACION IN 3 REQUISITES OF A VALID

PAYMENT CONDONATION/REMISSION
all properties NOT all properties 1. It must be gratuitous.
require more than 1 NOT require all 2. Accepted by obligor.
creditor creditors 3. Obligation is demandable.
NOT act of novation act of novation
NOT transfer transfer ownership 4. CONFUSION/MERGER
ownership - meeting in 1 person of qualities of debtor
requires may happen & creditor w/ same obligation
3 REQUISITES OF VALID      b. Consent of creditor.
CONFUSION/MERGER 2. DELEGACION – all must agree (creditor,
1. The merger of characters of debtor & old debtor, new debtor)
creditor must be in same person.      3REQUISITES
2. Take place between principal debtor &      a. Initiative from old debtor.
creditor.      b. Consent of debtor.
3. Clear & definite.      c. Acceptance by creditor.
7. SUBROGATION
5. COMPENSATION - change of creditor
- 2 persons are debtors & creditors of each
other 2 KINDS OF SUBROGATION
1. CONVENTIONAL – consent of original
6 ESSENTIAL REQUISITES OF parties & 3rd person
COMPENSATION 2. LEGAL – by law
1. Parties both principal debtors & creditors      a. creditor pays another preferred
of each other. creditor even w/o debtor’s knowledge
2. Compensation is not prohibited by law.      b. 3rd person pays the express approval of
3. No retention/controversy by 3rd person. debtor
4. 2 debts are due & demandable.      c. 3rd person pays even w/o knowledge of
5. 2 debts are liquidated. debtor
6. 2 debts both in money/consumable things.

(2) CLASSES OF COMPENSATION CONTRACT – meeting of minds between 2

1. As to effect persons to give something or to render
a. TOTAL – obligations completely service.
extinguished.
b. PARTIAL – a balance remains 3 ELEMENTS OF CONTRACT
1. ESSENTIAL – w/o them, contract cannot
2. As to origin or cause exist
a. LEGAL – by law      a. CONSENT of contracting parties
b. VOLUNTARY/CONVENTIONAL – agreement      b. OBJECT CERTAIN – subject matter
of parties      c. CAUSE/CONSIDERATION
c. JUDICIAL – order from the court In some contracts, ff are also essential:
d. FACULTATIVE – 1 of parties can      d. FORM
choose/oppose claiming compensation      e. DELIVERY
6. NOVATION
- substitution/change of obligation 2. NATURAL – found in certain contract,
- substitution of debtor presumed to exist unless stipulated
- subrogation of creditor
3. ACCIDENTAL – various particular
(3) OBLIGATIONS MAY BE MODIFIED BY: stipulations that may be agreed upon by
1. Changing object/principal contracting parties
conditions. (REAL NOVATION)
2. Changing the person of (7) CLASSIFICATION OF CONTRACTS
debtor/creditor. (PERSONAL NOVATION) According to:
a. Substitution – change of debtor 1. PERFECTION/FORMATION
b. Subrogation – change of creditor      a. CONSENSUAL – perfected by mere
3. Changing person of the parties & the consent
objects of principal condition. (MIXED      b. REAL – perfected by delivery
NOVATION)      c. FORMAL/SOLEMN – special formalities
are essential before perfection of contract
4 REQUISITES OF NOVATION
1. Old valid obligation.
2. Agreement of parties to new obligation.
3. Extinguishment of old obligation. 2. PARTIES OBLIGATED
4. Validity of new obligation.      a. UNILATERAL – only 1 has obligation
     b. BILATERAL – both parties require to
2 FORMS OF NOVATION BY SUBSTITUTION render reciprocal prestations
OF DEBTOR
1. EXPROMISION – w/ consent of creditor, NO 3. CAUSE
consent of old debtor      a. ONEROUS – exchange of considerations
     2REQUISITES      b. GRATUITOUS – no consideration
     a. Initiative of 3rd person. received in exchange of what is given
     c. REMUNERATORY – something is given      c. by provision of law
for benefit/service that had been rendered
previously 4. CONSENSUALITY OF CONTRACTS
- Contracts are perfected by mere consent
4. RISK OF FULFILLMENT Exceptions:
     a. COMMUTATIVE – equivalent values are      a. REAL CONTRACTS – perfected by
given by both parties delivery
     b. ALEATORY – fulfillment of contract      b. FORMAL/SOLEMN CONTRACTS – special
depends on chance (eg. insurance) form required for its perfection

5. IMPORTANCE 5. OBLIGATORINESS OF CONTRACTS

     a. PRINCIPAL – contract may stand alone - The contract, once perfected, has the
(eg. sale, partnership) force of law between parties which bound to
     b. ACCESSORY – existence depends on comply in good faith
another contract (pledge, guarantee)
     c. PREPARATORY – contract not an end by 4 KINDS OF INNOMINATE CONTRACTS
itself but a means thru w/c other contracts 1. I give that you may give
may be made (eg. agency) 2. I do that you may do
3. I give that you may do
6. NAME 4. I do that you may give
     a. NOMINATE – contract given a
particular/special name (eg. partnership) 4 RULES FOR INNOMINATE CONTRACTS
     b. INNOMINATE – not given special name 1. Agreement of parties
(eg. I give that you may give) 2. Law on Obligations & Contracts
3. Rules on most analogous nominate
7. SUBJECT MATTER contract
     a. Contracts involving things 4. Customs of place
     b. Contracts involving rights/credits
     c. Contracts involving services STIPULATION POR AUTRI
- stipulation in favor of 3rd person
3 STAGES OF CONTRACT
1. PREPARATION/CONCEPTION – preparatory 5 REQUISITES OF STIPULATION POR AUTRI
steps to perfect contract 1. Stipulation in favor of 3rd person
2. PERFECTION/BIRTH – meeting of minds 2. Stipulation is only PART, not the whole of
between 2 contracting parties the contract.
3. CONSUMMATION/TERMINATION – terms of 3. Both parties must conferred upon a favor
contract are performed, & contract is fully of 3rd person
executed 4. 3rd person must accept & say it to debtor
before its revocation/cancellation
5. Neither of both parties be the legal
representation/autho-rization of 3rd person
5 BASIC PRINCIPLES/CHARACTERISTICS OF A
CONTRACT CONSENT
1. PRINCIPLE OF AUTONOMY (liberty to - meeting of offer (certain) & acceptance
contract) (absolute) upon a thing
Provided they are not contrary to:
     a. Law 5 REQUISITES OF CONSENT
     b. Morals 1. Must be given by 2 or more parties
     c. Good customs 2. Parties are capacitate to enter in contract
     d. Public order 3. No vitiation of consent
     e. Public policy 4. No conflict between declared & intended
5. Legal formalities must be complied
2. MUTUALITY OF CONTRACTS
- the contract must bind both parties; its 7 RULES ON OFFER/ACEPTANCE
validity/compliance cannot be left to the 1. An offer must be certain.
will of one of them 2. Business advertisements for sale are NOT
3. RELATIVITY OF CONTRACTS offers but ONLY invitations to make an offer.
- Contracts take effect only between the 3. Advertisements for bidders are ONLY
parties, their assigns & heirs except when invitations.
there are rights & obligations not 4. An acceptance made by letter/telegram
transmissible: does NOT bind offeror EXCEPT from the TIME
     a. by their nature it came to his knowledge.
     b. by stipulation (stipulation por autri)
5. An offer made through an agent is 1. Mistake to identity/qualifications of
accepted from the TIME the acceptance is either of parties will vitiate consent ONLY
done through an agent. when IT is the principal cause of contract.
6. An offer is ineffective upon death, 2. Simple mistake of account must
insanity, insolvency, of EITHER party BEFORE be corrected.
acceptance is made. 3. No mistake if parties knew the risk/doubt
7. When offeror allowed offeree a certain affecting OBJECT of contract.
period to accept, offer MAY be withdrawn 4. When one of parties is unable to read or
AT ANYTIME unless there is something the contract is in language not understood
PAID/PROMISED. by him, & mistake/fraud is alleged, the
person enforcing the contract must FULLY
3 persons who CANNOT GIVE CONSENT to a explained the terms to him.
contract (if entered into, contract
is voidable) 2. FRAUD/DOLO
1. UNEMANCIPATED MINORS - when through insidious
2. INSANE/DEMENTED PERSONS (unless they words/machinations of one of the parties,
acted DURING LUCID INTERVAL) INDUCED the other to enter into a contract,
3. DEAF-MUTES who DO NOT know how to & w/o them, he will not agree.
write
DOLO CAUSANTE DOLO INCIDENTE
DEMENTED PERSON – NOT exactly insane; Serious Not serious
difficult to distin-guish right from wrong cause induces party NOT the cause to
to ENTER into enter into
LUCID INTERVAL – period when an INSANE contract contract
has acquired SANITY temporarily, therefore, make contract is valid;
capacitated to enter into a valid contract contract voidable liable for damages
2 RULES on persons WHO CANNOT GIVE 7 RULES OF FRAUD
CONSENT to a contract 1. Failure to disclose facts when these needs
1. Age of majority is 18 yrs old to be revealed, is a fraud.
2. A contract entered into by 2. Fraud should be SERIOUS (dolo causante)
UNEMANCIPATED MINOR w/o & SHOULD NOT be done by BOTH parties to
parents/guardian’s consent is voidable, make contract voidable.
except: 3. Incidental fraud (dolo incidente) ONLY
     a. Minor MISREPRESENTS his age obliges person to PAY DAMAGES.
(estoppel) 4. Usual exaggerations in trade, when other
     b. Contract involves sale & delivery of party know the “real” facts, is NOT FRAUD.
necessities to minor 5. A mere expression of opinion is NOT
FRAUD UNLESS made by an expert & the
5 VICES OF CONSENT other party relies on his special knowledge.
- NOTE: When there is a DEFECTIVE 6. Misrepresentation made in good faith is
CONSENT of EITHER of parties, contract NOT FRAUD but may constitute an error.
is voidable; Remedy: annulment of contract. 7. Misrepresentation by 3rd person DOES NOT
1. MISTAKE/ERROR vitiate consent UNLESS it
2. FRAUD/DECEIT created substantial mistake.
3. VIOLENECE
4. INTIMIDATION
5. UNDUE INFLUENCE

1. MISTAKE/ERROR
- wrong conception & lack of knowledge 3. VIOLENCE
upon a thing - serious/irresistible force is employed.
(2) MISTAKES W/C VITIATES CONSENT 2 RULES ON VIOLENCE
It should refer to: 1. Serious/irresistible force is employed w/c
1. substance of thing that is the OBJECT of constitutes the reason why one entered into
contract a contract.
2. conditions w/c MOVED either/both parties 2. Violence ANNULS obligation although it is
to enter into contract DONE by 3rd person not part of contract.

4. INTIMIDATION
4 RULES ON MISTAKE
- 1 of the parties is compelled by 2. Services not contrary to law, morals, good
a reasonable & well-grounded fear of an customs, public order, public policy
imminent & grave evil upon his 3. Services/things must NOT be
person/property to give his consent. legally/physically impossible
4. Services/things are w/in commerce of
3 RULES ON INTIMIDATION man including future things
1. Age, sex, & condition of person must used 5. Rights are NOT TRANSMISSIBLE.
to determine the degree of intimidation. 6. Determinate (kind) or determinable ( w/o
2. Intimidation ANNULS obligation although the need of new contract/agreement)
it is DONE by 3rd person not part of contract. 7. NO contract be entered for future
3. A threat to enforce one’s claim (claim inheritance UNLESS law states
must be just & legal), DOES NOT vitiate
consent. 4 REQUISITES OF CAUSE
1. It is just & equitable.
VIOLENCE INTIMIDATION 2. It exists.
External Internal 3. It is lawful.
Physical NO physical 4. It is true.
contact/coercion coercion; ONLY
MENTAL/MORAL
coercion

5. UNDUE INFLUENCE
- a person takes improper advantage of his LESION
power over other’s will, depriving the other - inadequacy of cause (eg. insufficient price
to his reasonable freedom of choice. for thing sold)

3 RULES ON UNDUE INFLUENCE RULES ON LESION

1. There is a person who takes improper - Lesion DOES NOT invalidate contract,
advantage of his power over other’s will, except there is:
depriving the other to his reasonable      a. Fraud
freedom of choice.      b. Mistake
2. Undue influence ANNULS obligation      c. Undue influence
although it is DONE by 3rd person not part of
contract. 2 FORM OF CONTRACTS
3. To constitute undue influence, ff 1. Contracts in writing
circumstances must be considered: (1) 2. Contracts in a public instrument
confidential, family, spiritual, & other
relations of parties; or (2) the aggrieved 1. Contracts w/c must be IN WRITING to be
party is suffering from mental weakness; or valid:
(3) ignorant; or (4) in financial distress.      a. Donation of personal property exceeds
P5000.
SIMULATION OF CONTRACT      b. Agent’s authority in sale of land/any
- process of INTENTIONALLY deceiving others interest.
by producing a contract not really      c. Contract of antichresis.
exist (absolute simulation), or w/c is      d Stipulation to pay interest on loans.
different from true agreement (relative      e. Stipulation to reduce common carrier’s
simulation). extraordinary diligence & to limit its
liability.
2 KINDS OF SIMULATED CONTRACT
1. ABSOLUTE SIMULATION (the parties DO 2. Contracts w/c must be IN A PUBLIC
NOT intend to be bound at all) INSTRUMENT to be valid:
- completely fictitious/make-believe; VOID      a. Donation of real property (both the
2. RELATIVE SIMULATION (parties conceal donation & accep-tance).
their true/real agreement)      b. Sale of real property.
- parties are bound to real/true      c. Partnership where real property/rights
agreement, EXCEPT: is contributed; or when capital contribution
     a. contract prejudice 3rd person exceeds P3000.
     b. purpose is contrary to law, morals,
good customs, public order, public policy REFORMATION OF INSTRUMENTS
- REMEDY in equity in w/c a written
7 REQUISITES OF OBJECT OF CONTRACT instrument is made/construed to the REAL
1. Specific & certain intention of parties when there is
an error/mistake.
 3 UNENFORCEABLE CONTRACTS
(5) CASES REFORMATION OF INSTRUMENT 1. Those entered in name of other person, or
IS AVAILABLE who acted BEYOND his powers.
1. Mutual mistake of parties. 2. Those who do not comply w/ the Statute
2. One party was mistaken & the other acted of Frauds.
fraud. 3. Both parties are incapable of giving
3. One party was mistaken & the other consent to a contract.
knew/believed that the instrument did not
state their REAL agreement. 7 VOID/INEXISTENT CONTRACTS
4. Ignorance, lack of skill, negligence, or bad 1. Those w/c are ABSOLUTELY
faith of person drafting the instrument DOES simulated/fictitious.
NOT state the TRUE INTENTION of parties 2. Those w/c contemplate an impossible
5. Two parties agree on mortgage/pledge of service.
personal/real property BUT the instrument 3. Those whose OBJECT is outside the
states the property is sold ABSOLUTELY, or commerce of man.
w/ the right to repurchase. 4. Those whose CAUSE/OBJECT did not exist
at time of tran-saction.
(3) NO REFORMATION OF INSTRUMENT 5. Those whose CAUSE/OBJECT/PURPOSE is
WHEN: contrary to law, morals, good customs,
1. Simple donation inter vivos where NO public order, or public policy.
CONDITION is imposed. 6. Those where INTENTION of parties to
2. Will. principal object CANNOT be ascertained.
3. Real agreement is VOID. 7. Those expressly prohibited/declared VOID
by law.
4 KINDS OF DEFECTIVE CONTRACTS
1. RESCISSIBLE – valid until rescinded; has
ALL essential requisites but because
of injury/damage to one of the parties, the
contract may be rescinded.
2. VOIDABLE – valid until annulled; has ALL
essential requisites but because of defect in
consent, contract may be annulled.
 3. UNENFORCEABLE – cannot be
sued/enforced unless ratified; no effect
NOW but may take effect upon ratification.
4. VOID – NO effect at all; cannot be
ratified/validated.

5 RESCISSIBLE CONTRACTS
1. Those entered by guardians & suffered
LESION by more than ¼ of value of the value
that is the OBJECT.
2. Those agreed upon in representation of
absentees, if the absentees suffered LESION.
3. Those undertaken in FRAUD of creditors
when the creditors cannot further claim.
4. If entered into contract w/o
knowledge/approval of litigants under
litigation.
5. Contracts subjected to rescission declared
by law.

3 VOIDABLE CONTRACTS
1. One of the parties INCAPABLE of giving
consent to a contract.
2. Those where consent vitiates by vices of
consent. (MFVIU)
3. Those agreed in the state of
drunkenness/hypnotic spell.