OBLIGATIONS b.

Alternative - where the debtor must

perform any of the prestations9
I. Definition c. Facultative - where only one thing is due
but the debtor has reserved the right to substitute it
A juridical necessity to give, to do or not to w/ another10
1
do , one impressed with the character of
enforceability. 3. According to Plurality of subjects:

II. Elements of an Obligation a. Joint - one in w/c each of the debtors is

liable only for a proportionate part of the debt or
1) an active subject:2 the possessor of a right; he in each creditor is entitled only to a proportionate part
whose favor the obligation is constituted; of the credit.11
2) a passive subject:3 he who has the duty of b. Solidary - one in w/c the debtor is liable
giving, doing or not doing; for the entire obligation or each creditor is entitled
3) the object or prestation:4 it may consist of giving to demand the whole obligation. There is only one
a thing, or doing or not doing a certain obligation is a solidary obligation.
act5and
4) the efficient cause:6 the reason why the 4. According to Performance:
obligation exists
a. Divisible - one susceptible of partial
III. Different Kinds of Prestations performance.
b. Indivisible - one that must be performed
1. To give - consists in the delivery of a movable or in one act.12
an immovable thing, in order to create a real right or
for the use of the recipient or for its simple 5. According to Sanctions for Breach:
possession or in order to return to its owner
a. Simple
2. To do - all kinds of work or services, whether b. W/ a penal clause - an accessory
mental or physical undertaking to assume greater liability in case of
breach.13
3. Not to do - consists in abstaining from some act,
includes “not to give,” both being negative
obligations 9
The characteristic of alternative obligations is that, several
objects being due, the fulfillment of one is sufficient
IV. Classification of Obligations (Tolentino)
10
Art. 1206
1. According to criteria of demandability: 11
there are as many obligations as there are debtors multiplied
a. Pure - one w/c is not subject to a by the number of creditors.
condition or a term. Effects of Joint Liability:
1. The demand by one creditor upon one debtor, produces the
b. Conditional - the acquisition of rights, as effects of default only w/ respect to the creditor who
well as the extinguishment or loss of those already demanded and the debtor on whom the demand was made, but
acquired, shall depend upon the happening of the not w/ respect to the others;
event which constitutes the condition.7 2. The interruption of prescription by the judicial demand of
c. W/ a term8 - one creditor upon a debtor, does not benefit the other creditors
nor interrupt the prescription as to other debtors. On the same
principle, a partial payment or acknowledgement made by one
2. According to plurality of objects: of several joint debtors does not stop the running of the statute
of limitations as to the others;
a. Single 3. The vices of each obligation arising from the personal
defect of a particular debtor or creditor does not affect the
obligation or rights of the others;
1
Art. 1156 4. The insolvency of a debtor does not increase the
2
obligee or creditor responsibility of his co-debtors, nor does it authorize a creditor
3
obligor or debtor to demand anything from his co-creditors;
4
the subject matter of the obligation 5. In the joint divisible obligation, the defense of res judicata
5
Requisites: is not extended from one debtor to another. (Manresa.)
i. it must be licit 12
General rule: Obligation is indivisible w/c means that it has
ii. it must be possible, physically & juridically to be performed in one act singly. Why? Bec. the law
iii. it must be determinate or determinable provides so: Unless there is an express stipulation to that
iv. it must have a possible equivalent in money effect, the creditor cannot be compelled partially to receive the
6
vinculum or juridical tie prestations in which the obligation consists. Neither may the
7
Art. 1181 debtor be required to make partial payments. xxx (Art. 1248,
A past thing can never be a condition. A condition is always par. 1.)
future and uncertain. Three Exceptions to the Rule on Indivisibility:
Past event unknown to the parties.-- It is really the knowledge 1. When the parties so provide. (Art. 1248, par. 1.)
of the event w/c constitutes the future. It is the knowledge w/c 2. When the nature of the obligation necessarily entails
is future and uncertain. performance in parts.
Effect of Impossible Condition.-- It annuls the obligation 3. Where the law provides otherwise.
w/c depends upon them. The entire juridical tie is tainted by 13
The purpose is to strengthen the coercive force of the
the impossible condition. obligation. When a penal clause is present, damages do not
8
see Reference have to be proved.
1
 damage to another, there being no pre-existing
contractual relations between the parties.22
V. Sources of Obligations14
A. A single act or omission can give rise to VI. Nature and Effect of obligations
different causes of action
A. Obligation to give23
It is a source of obligation because of the
provision in Article 100 of the Revised code that 1. A determinate or specific thing
“every person criminally liable is also civilly When what is to be delivered is a
liable.”15 determinate thing, the creditor, in addition to the
right granted him by Article 1170,24 may compel the
B. Natural Obligations16 debtor to make the delivery.25
They are real obligations to which the law
denies an action, but which the debtor may perform The obligation to give a determinate thing
voluntarily. includes that of delivering all its accessions and
accessories, even though they may not have been
Examples of natural obligations enumerated mentioned.26
under the Civil Code:
2. An indeterminate or generic thing
1. Performance after the civil obligation has If the thing is indeterminate or generic, he
prescribed; may ask that the obligation be complied with at the
2. Reimbursement of a third person for a debt that expense of the debtor.27
has prescribed;
3. Restitution by minor after annulment of contract; B. Obligation to do or not to do
4. Delivery by minor of money or fungible thing in In Obligations to do
fulfillment of obligation; If a person is obliged to do something, it
5. Performance after action to enforce civil must be done as promised, and it cannot be
obligation has failed; substituted by another act or forbearance against the
6. Payment by heir of debt exceeding value of obligee’s will28. If the obligor fails to do it, the same
property inherited; and shall be executed at his cost29 albeit he may not be
7. Payment of legacy after will have been declared compelled to do so personally or by himself.
void.
This same rule shall be observed if he does
A. Extra-contractual Obligations17 it in contravention of the tenor of the obligation.
1. Quasi-contract18 - That juridical relation Furthermore, it may be decreed that what has been
resulting from a lawful, voluntary and unilateral act, poorly done be undone.30
and which has for its purpose, the payment of
indemnity to the end that no one shall be unjustly In Obligations not to do
enriched or benefited at the expense of another When the obligation consists in not doing,
and the obligor does what has been forbidden him,
2 kinds: it shall also be undone at his expense.31
a. Negotiorum gestio - unauthorized C. Breaches of obligations
management19 1. Complete failure to perform
b. Solutio indebiti - undue payment 20
Debtor is unable to comply with his obligation
21
2. Quasi-delict/torts - It is a fault or act of because of fortuitous event.32
negligence ( or omission of care ) which causes 22
Elements:
a) There must be fault or negligence attributable to the person
charged
b) There must be damage or injury
14
Obligations arise from: c) There must be a direct relation of cause and effect between
(1) Law the fault or negligence on the one hand and the damage or
(2) Contracts injury on the other hand ( proximate cause )
(3) Quasi-contracts
23
Three Accessory Obligations:
(4) Acts or omissions punished by law and 1. To take care of the thing w/ the diligence of a good father
(5) Quasi-delicts. of a family until actual delivery.(Art. 1163)
15
Nolledo, Jose N., The Philippine Law on Obligations and 2. To deliver the fruits to the creditor (fruits produced after
Contracts Explained, 1980 Ed., p. 2 obligation to deliver arises).(Art. 1164)
16
a. Based not on positive law but on equity and natural law 3. To deliver accessions and accessories(Art. 1166)
24
b. Do not grant such right of action to enforce their 25
performance 26
17
Arts. 2142 to 2194
27
18
obligation ex quasi-contractu
28
19
This takes place when a person voluntarily takes charge of
29
another’s abandoned business or property without the owner’s
30
authority
31
20
This takes place when something is received when there is
no right to demand it, and it was unduly delivered thru mistake
21
obligation ex quasi-delicto or ex quasi maleficio 32

2
 2. Default, delay or mora33 – no
default unless creditors makes a demand

GENERAL RULE: 4. Negligence (culpa)38 in the

There must be a demand (judicial or extra- performance of obligation
judicial) before delay may be incurred.
a. Diligence normally
EXCEPTIONS: required is ordinary
1. obligation or law expressly so declares diligence or diligence
2. time is of the essence of the contract of a good father of a
3. demand is useless as when obligor has family; exceptions:
rendered beyond his power to perform common carriers
4. there is acknowledgment of default requiring
extraordinary
In reciprocal obligations, one party incurs in diligence
delay from the moment the other party fulfills his
obligation, while he himself does not comply or is The deposit of effects made by travellers in
not ready to comply in a proper manner with what is hotels or inns shall also be regarded as necessary.
incumbent upon him.34 The keepers of hotels or inns shall be responsible
for them as depositaries, provided that notice was
A, Mora solvendi given to them, or to their employees, of the effects
brought by the guests and that, on the part of the
Delay of the debtor to perform his latter, they take the precautions which said hotel-
obligation. It may be: keepers or their substitutes advised relative to the
care and vigilance of their effects.39
a. Ex re – obligation is to give
b. Ex persona – obligation is to do35 The hotel-keeper is liable for the vehicles,
animals and articles which have been introduced or
B. Mora accipiendi placed in the annexes of the hotel.40

Delay of the creditor to accept the delivery The responsibility referred to in the two
of the thing w/c is the object of the obligation preceding articles shall include the loss of, or injury
to the personal property of the guests caused by the
C. Compesatio morae servants or employees of the keepers of hotels or
inns as well as strangers; but not that which may
Delay of the parties or obligors in reciprocal proceed from any force majeure. The fact that
obligation travellers are constrained to rely on the vigilance of
the keeper of the hotels or inns shall be considered
1. Fraud in the performance in determining the degree of care required of him.41
of obligation36
The act of a thief or robber, who has entered
a. Waiver of future the hotel is not deemed force majeure, unless it is
fraud is void done with the use of arms or through an irresistible
force.42
Responsibility arising from fraud is
demandable in all obligations. Any waiver of an The hotel-keeper is not liable for
action for future fraud is void.37 compensation if the loss is due to the acts of the
guest, his family, servants or visitors, or if the loss
arises from the character of the things brought into
the hotel.43

5. Contravention of the tenor

of obligation
33
Non-fulfillment of the obligation with respect to time
34
see Art. 1169
The faithful observance of an obligation
The general rule is that fulfillment by both parties should be according to its tenor is mandated by law; an
simultaneous except when different dates for the performance
of obligation is fixed by the parties.
38
Omission of that diligence which is required by the nature of
Demand is still necessary if their respective obligations are to the obligation and corresponds with the circumstances of the
be performed on separate dates. persons, of the time and of the place
35
There can be delay only in positive obligations (to give/to Negligence can be waived unless the nature of the obligation
do). There can be no delay in negative obligations (not to or public policy requires extraordinary diligence as in
give/not to do). common carrier.
36
Deliberate and intentional evasion of the fulfillment of an
39
Art. 1998
obligation
40
Art. 1999
37
Art. 1171
41
Art. 2000
Future fraud cannot be waived because it would result to 42
Art. 2001
illusory obligation. 43
Art. 2002
3
unexcused failure thereof renders the obligor liable complied with at the expense of the debtor.50
for losses and damages caused thereby.44
6. Legal excuse for breach of In obligation to do
obligation – fortuitous event;
requisites If a person obliged to do something fails to
do it, the same shall be executed at his cost. This
Fortuitous event45 same rule shall be observed if he does it in
contravention of the tenor of the obligation.
An event which could not be foreseen or which Furthermore, it may be decreed that what has been
though foreseen was inevitable. done poorly be undone.51

Requisites: 2. Rescission52

1. cause is independent of the will of the debtor46 The power to rescind obligations is implied
2. the event must be unforeseeable or unavoidable in reciprocal ones, in case one of the obligors
3. occurrence must be such as to render it should not comply with what is incumbent upon
impossible for the debtor to fulfill his obligation him.53
in a normal manner
4. debtor must be free from any participation in The injured party may choose between the
the aggravation of the injury resulting to the fulfillment and the rescission of the obligation,54
creditor47 with the payment of damages in either case. He may
also seek rescission, even after he has chosen
A. Remedies available to creditor in fulfillment, if the latter should become impossible.
cases of breach The court shall decree the rescission
claimed, unless there be just cause authorizing the
1. Specific Performance48 fixing of a period.

When what is to be delivered is a This is understood to be without prejudice to

determinate thing, the creditor, in addition to the the rights of third persons who have acquired the
right granted him by Art 1170 (indemnification for
damages), may compel the debtor to make the 50
Art 1165, Par 2
delivery.49 Delivery of anything belonging to the species stipulated will
be sufficient.
Debtor cannot avoid obligation by paying damages if the
a. Substituted
creditor insists on the performance.
performance by a 51
Art. 1167
third person on The court has no discretion to merely award damages to the
obligation to creditor when the act can be done in spite of the refusal or
deliver generic failure of debtor to do so.
thing and in EXCEPTION: Imposition of personal force or coercion
upon the debtor to comply with his obligation -
obligation to do, tantamount to involuntary servitude and imprisonment for debt
unless a purely 52
resolution in reciprocal obligations
personal act Only applies to reciprocal obligations, where there is
“reciprocity” between the parties i.e. creditor debtor relations
arise from the same cause or “identity of cause”.
Reciprocal obligations have a “TACIT RESOLUTORY
CONDITION
53
Power to rescind:
Pertains to the injured party, party who did not perform not
In obligation to give generic thing entitled to insist upon the performance of the contract by the
defendant or recover damages by reason of his own breach
If the thing is indeterminate or generic, he Rights of injured party subordinated to the rights of a 3 rd
person to whom bad faith is not imputable
may ask that the obligation be Not absolute, not permitted in casual/slight breach, may
only be claimed in substantial breach
(Song Fo v. Hawaiian Philippines)
44
see Art. 1170 Rescission requires judicial approval to produce legal
45
General Rule: No liability in case of fortuitous event. effect
Exceptions: EXCEPTION: object is not yet delivered AND obligation
1. When expressly declared by law (e.g. Article 552(2), has not yet been performed
1165(3), 1268, 1942, 2147, 2148 and 2159 of the Civil Code.) If the obligation has not yet been performed: extrajudicial
2. When expressly declared by stipulation or contract declaration of party willing to perform would suffice; can
3. When the nature of the obligation requires the assumption refuse to perform if the other party is not yet ready to comply
of risk If the injured party has already performed: cannot
4 When the obligor is in default or has promised to deliver the extrajudicially rescind IF the other party opposes the
same thing to 2 or more persons who do not have the same rescission (otherwise, rescission produces legal effect). In the
interest [Article 1165(3)]. case the other party impugns rescission, the court comes in
46
It must not only be the proximate cause but it must be the either to: a. Declare the rescission as properly made b. Give a
ONLY and SOLE CAUSE. period to the debtor in which to perform
47
Lasam vs. Smith, 45 Phil. 657 54
The remedy is alternative. Party seeking rescission can only
48
in obligation to give specific thing elect one between fulfillment and rescission. There can be no
49
Art. 1165, par 1; see also ROC Rule 39, Sec 10 partial performance and partial rescission.
4
thing, in accordance with articles 138555 and 138856 Right of the lessor to go directly to sublessee
and the Mortgage Law.57 for unpaid rents of the lessee.64

In case both parties have committed a Right of the laborers or persons who furnish
breach of the obligation, the liability of the first materials for a piece of work undertaken by a
infractor shall be equitably tempered by the courts. contractor to go directly to the owner for any unpaid
If it cannot be determined which of the parties first claims due to the contractor.65
violated the contract, the same shall be deemed
extinguished, and each shall bear his own VII. Kinds of civil obligations
damages.58
A. Pure
3. Damages, in any event
Every obligation whose performance does
In case of breach of the obligation, 59 not depend upon a future or uncertain event, or
exclusive or in addition to specific performance. upon a past event unknown to the parties, is
demandable at once.66
2. Subsidiary remedies of
creditors Every obligation which contains a resolutory
condition shall also be demandable, without
a. Accion prejudice to the effects of the happening of the
subrogatoria60 event.

Action which the creditor may exercise in When the debtor binds himself to pay when
place of the negligent debtor in order to preserve or his means permit him to do so, the obligation shall
recover for the patrimony of the debtor the product be deemed to be one with a period, subject to the
of such action, and then obtain therefrom the provisions of article 1197.67
satisfaction of his own credit.61
B. Conditional

In conditional obligations, the acquisition of

rights, as well as the extinguishment or loss of those
already acquired, shall depend upon the happening
b. Accion pauliana62 of the event which constitutes the condition.68
1. Suspensive condition69 -
Creditors have the right to set aside or wherein the happening of
revoke acts which the debtor may have done to the event gives birth to an
defraud them. All acts of the debtor which reduce obligation
his patrimony in fraud of his creditors, whether by
gratuitous or onerous title, can be revoked by this 2. Resolutory condition70 -
action. wherein the happening of
the event will extinguish
c. Accion directa63 the obligation

3. Potestative, casual or
mixed
55
See Reference Potestative Condition - one w/c depends
56
ibid solely on the will of either one party.71
57
Art. 1191
58
Art. 1192
59
Art. 1170; See Reference Casual Condition - one where the condition
Recoverable damages include any and all damages that a is made to depend upon a third person or upon
human being may suffer. Responsibility for damages is chance.72
indivisible
60
An action against the debtor’s debtor Mixed Condition - one w/c depends partly
61
subrogatory action; See Art. 1177
upon the will of one of the parties and partly on
Previous approval of court is not necessary
Plaintiff entitled only to so much as is needed to satisfy his either chance or the will of a third person
credit, any balance shall pertain to the debtor
Patrimony of the debtor (includes both present and future
64
See Art. 1652
property) is liable for the obligations he may contract by being
65
See Art. 1729
a legal guaranty in favor of his creditors. Hence, he cannot
66
Art. 1179
maliciously reduce such guaranty
67
Art. 1180
62
rescissory action
68
Art. 1181
An action to rescind contracts entered into by the debtor in
69
condition precedent
fraud of creditors ( Arts. 1177, last sentence and 1381, par. 3, 70
condition subsequent
See Reference 71
e.g., "I will give you my plantation in Davao provided you
Payments of pre-existing obligations already due, whether reside in Davao permanently."
natural or civil, cannot be impugned by an accion pauliana 72
e.g., "I will give you my land in Pampanga if you will pass
63
Arts. 1652, 1608, 1729 & 1893; see reference the bar exams this year."
5
 observed in case of the improvement, loss or
a. Obligations deterioration of the thing during the pendency of the
subject to condition:
potestative
suspensive (1) If the thing is lost without the fault of the debtor,
conditions are the obligation shall be extinguished;
void
(2) If the thing is lost through the fault of the debtor,
he shall be obliged to pay damages; it is understood
When the fulfillment of the condition
that the thing is lost when it perishes, or goes out of
depends upon the sole will of the debtor, the
commerce, or disappears in such a way that its
conditional obligation shall be void. If it depends
existence is unknown or it cannot be recovered;
upon chance or upon the will of a third person, the
obligation shall take effect in conformity with the (3) When the thing deteriorates without the fault of
provisions of this Code.73 the debtor, the impairment is to be borne by the
creditor;
4. Effect of the happening of
suspensive condition (4) If it deteriorates through the fault of the debtor,
the creditor may choose between the rescission of
The effects of a conditional obligation to the obligation and its fulfillment, with indemnity for
give, once the condition has been fulfilled, shall damages in either case;
retroact to the day of the constitution of the
obligation. When the obligation imposes reciprocal (5) If the thing is improved by its nature, or by time,
prestations upon the parties, the fruits and interests the improvement shall inure to the benefit of the
during the pendency of the condition shall be creditor;
deemed to have been mutually compensated. If the (6) If it is improved at the expense of the debtor, he
obligation is unilateral, the debtor shall appropriate shall have no other right than that granted to the
the fruits and interests received, unless from the usufructuary.77
nature and circumstances of the obligation it should
be inferred that the intention of the person As for the obligations to do and not to do,
constituting the same was different. the provisions of the second paragraph of article
118778 shall be observed as regards the effect of the
In obligations to do and not to do, the courts extinguishment of the obligation.79
shall determine, in each case, the retroactive effect
of the condition that has been complied with.74
C. Obligation with a period or a
term80
Resolutory condition – no
Obligations for whose fulfillment a day
retroactivity
certain has been fixed, shall be demandable only
when that day comes.
Every obligation which contains a resolutory
condition shall also be demandable, without
Obligations with a resolutory period take
prejudice to the effects of the happening of the
effect at once, but terminate upon arrival of the day
event.75
certain.
In conditional obligations, the acquisition of A day certain is understood to be that which
rights, as well as the extinguishment or loss of those must necessarily come, although it may not be
already acquired, shall depend upon the happening known when.
of the event which constitutes the condition.76
If the uncertainty consists in whether the day
3. Effect of loss of specific will come or not, the obligation is conditional, and
thing or deterioration or it shall be regulated by the rules of the preceding
improvement of specific Section.81
thing before suspensive
condition; if this occurs in 1. Suspensive period; effect
resolutory condition in if suspensive period is for the
obligation to do or not to
do 77
Art. 1189
78
supra
When the conditions have been imposed 79
Art. 1190, par. 3
with the intention of suspending the efficacy of an 80
General rule:
obligation to give, the following rules shall be If a period is attached in an obligation, the presumption is
that it is for the benefit of both parties. The consequence is
73
Art. 1182 that the creditor cannot compel the performance before the
74
Art. 1187 arrival of the term; the debtor cannot compel acceptance
75
Article 1179, par. 2 before the arrival of the term.
76
Art. 1181 81
Art. 1193
6
 benefit of both debtor and of a. Instances when
creditor, unless given in favor courts may fix the
of one of them; if given to period
debtor alone, debtor losses
benefit of period in any of the If the obligation does not fix a period, but
five cases in Art. 1198 – from its nature and the circumstances it can be
obligation retroact to the day inferred that a period was intended, the courts may
of its constitution fix the duration thereof.

Suspensive period The courts shall also fix the duration of the
period when it depends upon the will of the debtor.
- the obligation has already arisen
except that it is not yet demandable In every case, the courts shall determine
such period as may under the circumstances have
If the term is for the benefit of the creditor - been probably contemplated by the parties. Once
fixed by the courts, the period cannot be changed by
The creditor can demand them.85
performance anytime; but the debtor cannot insist
on payment before the period. b. Creditor must ask
court to set the
If the term is for the benefit of the debtor - period, before he
can demand
The creditor cannot demand payment
performance anytime; but the debtor can insist on
performance anytime.82
D. Alternative or Facultative86

1. Difference between
The debtor shall lose every right to make use alternative and facultative
of the period: obligations87

(1) After the obligation has been contracted, he As to contents of the obligation: In the
becomes insolvent, unless he gives a guaranty or alternative, there are various prestations all of w/c
security for the debt; constitute parts of the obligation; while in
facultative, only the principal prestation constitutes
(2) He does not furnish to the creditor the the obligation, the accessory being only a means to
guaranties or securities which he has promised; facilitate payment.

(3) By his own acts he has impaired said guaranties As to nullity: In alternative obligations, the
or securities after their establishment, and when nullity of one prestation does not invalidate the
through a fortuitous event they disappear, unless he obligation, w/c is still in force w/ respect to those
immediately gives new ones equally satisfactory; w/c have no vice; while in facultative, the nullity of
the principal prestation invalidates the obligation
(4) Debtor violates any undertaking, in and the creditor cannot demand the substitute even
consideration of which the creditor agreed to the when this is valid.
period;
As to choice: In alternative, the right to
(5) Debtor attempts to abscond 83
choose may be given to the creditor; while in
facultative, only the debtor can choose the
2. Resolutory period substitute prestation.

Obligations with a resolutory period take As to effect of loss: In alternative, only the
effect at once, but terminate upon arrival of the day impossibility of all the prestations due w/o fault of
certain.84 the debtor extinguishes the obligation; while in
facultative, the impossibility of the principal
3. Definite or indefinite
period
85
Art. 1197
86
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
82
Illustrations: "I promise to pay within 60 days." This is a part of the other undertaking.
term for the benefit of the debtor. 87
Facultative obligations always involve choice by the debtor.
"I promise to pay Clara the sum of P100,000 on or before Oct. In theory, it is easy to distinguish a facultative obligation
31, 1996." This is a term for the benefit of the debtor. from an alternative one. But in practice, it is difficult to
83
Art. 1198 distinguish the two. You just have to find out what the parties
84
in diem, or resolutory really intended (Balane)
7
prestation is sufficient to extinguish the obligation, e. If all are lost through fortuitous event, the
even if the substitute is possible.88 obligation is extinguished.
2. Effect of loss of specific
things or impossibility of f. If all are lost through the creditor's fault,
performance of alternative, the obligation is extinguished.
through fault of
debtor/creditor or through VIII. Joint and Solidary obligation
fortuitous events
A. Joint (divisible) obligation
If the choice is debtor's
1. Concurrence of two or
a. When only one prestation is left (whether more creditors and or two
or not the the rest of the prestations have been lost or more debtors
through fortuitous event or through the fault of the
debtor), the debtor may perform the one that is a. Joint obligation is
left.89 presumed, unless
otherwise
b. If the choice is limited through the indicated by the
creditor's own acts, the debtor can ask for resolution law or nature of
plus damages.90 obligation

c. If everything is lost through the debtor's The concurrence of two or more creditors or
fault, the latter is liable to indemnify the creditor for of two or more debtors in one and the same
damages.91 obligation does not imply that each one of the
d. If some things are lost through the former has a right to demand, or that each one of the
debtor's fault, the debtor can still choose from those latter is bound to render, entire compliance with the
remaining. prestation. There is a solidary liability only when
the obligation expressly so states, or when the law
e. If all are lost through fortuitous event, the or the nature of the obligation requires solidarity.95
obligation is extinguished.
b. Obligation
f. If all prestations but one are lost through presumed to be
fortuitous event, and the remaining prestation was divided into as
lost through the debtor's fault, the latter is liable to many equal shares
indemnify the creditor for damages. as there are
creditors or
g. If all but one are lost through the fault of debtors
the debor and the last one was lost through through
fortuitous event, the obligation is extinguished. The credit or debt or deemed divided into as
many shares as there are creditors or debtors to each
Choice is the creditor's other, each resulting credit or debt being considered
distinct from one another.96
a. If one or some are lost through fortuitous
event, the creditor may choose from those c. Each credit is
remaining.92 distinct from one
another, therefore
b. If one or some are lost through the a joint debtor
debtor's fault, the creditor has choice from the cannot be required
remainder or the value of the things lost plus to pay for the
damages.93 share of another
with debtor,
c. If all are lost through the debtor's fault, although he may
the choice of the creditor shall fall upon the price of pay if he wants to
any of them, w/ indemnity for damages.94
If the division is impossible, the right of the
d. If some are lost through the creditor's creditors may be prejudiced only by their collective
fault, the creditor may choose from the remainder. acts, and the debt can be enforced only by
proceeding against all the debtors. If one of the
latter should be insolvent, the others shall not be
liable for his share.97
88
IV Tolentino
89
Art. 1202 d. Insolvency of a
90
Art. 1203 joint debtor,
91
Art. 1204
92
Art. 1205 (1) 95
Art. 1207
93
Art. 1205 (2) 96
see Art. 1208
94
Art. 1205 (3) 97
Art. 1209
8
 others not liable simultaneously. The demand made against one of
for his share98 them shall not be an obstacle to those which may
subsequently be directed against the others, so long
B. Joint Indivisible Obligation as the debt has not been fully collected.103

1. Obligation cannot be Payment made by one of the solidary

performed in parts but debtors extinguishes the obligation. If two or more
debtors are bound jointly solidary debtors offer to pay, the creditor may
choose which offer to accept.
Generally, obligations are indivisible since
He who made the payment may claim from
the integrity of the obligations requires their
his co-debtors only the share which corresponds to
payment or performance completely.99
each, with the interest for the payment already
made. If the payment is made before the debt is due,
2. In case of failure of one
no interest for the intervening period may be
joint debtor to perform his
demanded.
part (share), there is default
but only debtor guilty shall When one of the solidary debtors cannot,
be liable for damages because of his insolvency, reimburse his share to
the debtor paying the obligation, such share shall be
A joint indivisible obligation gives rise to borne by all his co-debtors, in proportion to the debt
indemnity for damages from the time anyone of the of each.104
debtors does not comply with his undertaking. The
debtors who may have been ready to fulfill their A solidary debtor may, in actions filed by
promises shall not contribute to the indemnity the creditor, avail himself of all defenses which are
beyond the corresponding portion of the price of the derived from the nature of the obligation and of
thing or of the value of the service in which the those which are personal to him, or pertain to his
obligation consists.100 own share. With respect to those which personally
belong to the others, he may avail himself thereof
C. Solidary obligation only as regards that part of the debt for which the
latter are responsible.105
1. Anyone of the solidary
creditors may collect or 3. Each one of solidary
demand payment of creditors may do
whole obligation; there is whatever maybe useful to
mutual agency among the others, but not
solidary debtors anything prejudicial to
them; however, any
The debtor may pay any one of the solidary novation, compensation,
creditors; but if any demand, judicial or confusion or remission of
extrajudicial, has been made by one of them, debt executed by any
payment should be made to him.101 solidary creditor shall
extinguish the obligation
Novation, compensation, confusion or without prejudice to his
remission of the debt, made by any of the solidary liability for the shares of
creditors or with any of the solidary debtors, shall the other solidary
extinguish the obligation, without prejudice to the creditors
provisions of article 1219.
Each one of the solidary creditors may do
The creditor who may have executed any of whatever may be useful to the others, but not
these acts, as well as he who collects the debt, shall anything which may be prejudicial to the latter.106
be liable to the others for the share in the obligation
corresponding to them.102 D. Divisible and Indivisible

2. Any of the solidary For the purposes of the preceding articles,

debtor may be required to obligations to give definite things and those which
pay the whole obligation; are not susceptible of partial performance shall be
there is mutual guaranty deemed to be indivisible.
among solidary debtors
When the obligation has for its object the
The creditor may proceed against any one of execution of a certain number of days of work, the
the solidary debtors or some or all of them accomplishment of work by metrical units, or
analogous things which by their nature are
98
ibid
99
Arts. 1233 and 1248. 103
Art. 1216
100
Art. 1224 104
Art. 1217
101
Art. 1214 105
Art. 1222
102
Art. 1215 106
Art. 1222
9
susceptible of partial performance, it shall be latter, cannot compel the creditor to subrogate him
divisible. in his rights, such as those arising from a mortgage,
guaranty, or penalty.113
However, even though the object or service
may be physically divisible, an obligation is Payment made by a third person who does
indivisible if so provided by law or intended by the not intend to be reimbursed by the debtor is deemed
parties. to be a donation, which requires the debtor's
consent. But the payment is in any case valid as to
In obligations not to do, divisibility or the creditor who has accepted it114
indivisibility shall be determined by the character of 1. Dation in payment
the prestation in each particular case.107
Dation in payment, whereby property is
E. Obligations with a Penal Clause alienated to the creditor in satisfaction of a debt in
money, shall be governed by the law of sales.115
In obligations with a penal clause, the 2. Form of payment
penalty shall substitute the indemnity for damages
and the payment of interests in case of The payment of debts in money shall be
noncompliance, if there is no stipulation to the made in the currency stipulated, and if it is not
contrary. Nevertheless, damages shall be paid if the possible to deliver such currency, then in the
obligor refuses to pay the penalty or is guilty of currency which is legal tender in the Philippines.
fraud in the fulfillment of the obligation.
The delivery of promissory notes payable to
The penalty may be enforced only when it is order, or bills of exchange or other mercantile
demandable in accordance with the provisions of documents shall produce the effect of payment only
this Code.108 when they have been cashed, or when through the
fault of the creditor they have been impaired.
Proof of actual damages suffered by the
In the meantime, the action derived from the
creditor is not necessary in order that the penalty
original obligation shall be held in the abeyance.116
may be demanded. 109
3. Extraordinary inflation or
The judge shall equitably reduce the penalty deflation
when the principal obligation has been partly or
irregularly complied with by the debtor. Even if In case an extraordinary inflation or
there has been no performance, the penalty may deflation of the currency stipulated should
also be reduced by the courts if it is iniquitous or supervene, the value of the currency at the time of
unconscionable.110 the establishment of the obligation shall be the basis
of payment, unless there is an agreement to the
The nullity of the penal clause does not contrary.117
carry with it that of the principal obligation.
4. Application of payment118
The nullity of the principal obligation carries
with it that of the penal clause.111 He who has various debts of the same kind
in favor of one and the same creditor, may declare
IX. Extinguishment of Obligations at the time of making the payment, to which of
them the same must be applied. Unless the parties
A. Payment so stipulate, or when the application of payment is
made by the party for whose benefit the term has
The creditor is not bound to accept payment been constituted, application shall not be made as to
or performance by a third person who has no debts which are not yet due.
interest in the fulfillment of the obligation, unless
there is a stipulation to the contrary. If the debtor accepts from the creditor a
receipt in which an application of the payment is
Whoever pays for another may demand from made, the former cannot complain of the same,
the debtor what he has paid, except that if he paid unless there is a cause for invalidating the
without the knowledge or against the will of the contract.119
debtor, he can recover only insofar as the payment
has been beneficial to the debtor. 112 113
Art. 1237
114
Art. 1238
Whoever pays on behalf of the debtor
115
Art. 1245
Dation in payment is governed by the law on sales because
without the knowledge or against the will of the it is as if the creditor is now the vendee,and the debtor
becomes now the vendor.
107
Art. 1225 116
Art. 1249
108
Art. 1226 117
Art. 1250
109
Art. 1228 118
the designation of a debt which is being paid by the debtor
110
Art. 1229 who has several obligations of the same kind in favor of the
111
Art. 1230 creditor to whom the payment is made (quoting Tolentino.)
112
Art. 1236 119
Art. 1252
10
 Once the consignation has been duly made,
If the debt produces interest, payment of the the debtor may ask the judge to order the
principal shall not be deemed to have been made cancellation of the obligation.
until the interests have been covered.120
Before the creditor has accepted the
When the payment cannot be applied in consignation, or before a judicial declaration that
accordance with the preceding rules, or if the consignation has been properly made, the debtor
application cannot be inferred from other may withdraw the thing or the sum deposited,
circumstances, the debt which is most onerous to allowing the obligation to remain in force.126
the debtor, among those due, shall be deemed to
have been satisfied. If, the consignation having been made, the
creditor should authorize the debtor to withdraw the
If the debts due are of the same nature and same, he shall lose every preference which he may
burden, the payment shall be applied to all of them have over the thing. The co-debtors, guarantors and
proportionately.121 sureties shall be released.127

5. Tender of Payment and B. Loss of Determinate Thing Due

Consignation or Impossibility or difficulty of
performance
If the creditor to whom tender of payment
has been made refuses without just cause to accept An obligation which consists in the delivery
it, the debtor shall be released from responsibility of a determinate thing shall be extinguished if it
by the consignation of the thing or sum due. should be lost or destroyed without the fault of the
debtor, and before he has incurred in delay.
Consignation alone shall produce the same
effect in the following cases: When by law or stipulation, the obligor is
liable even for fortuitous events, the loss of the
(1) When the creditor is absent or unknown, or does thing does not extinguish the obligation, and he
not appear at the place of payment; shall be responsible for damages. The same rule
(2) When he is incapacitated to receive the payment applies when the nature of the obligation requires
at the time it is due; the assumption of risk.128
(3) When, without just cause, he refuses to give a
receipt; The debtor in obligations to do shall also be
(4) When two or more persons claim the same right released when the prestation becomes legally or
to collect; physically impossible without the fault of the
(5) When the title of the obligation has been lost.122 obligor.129

In order that the consignation of the thing When the service has become so difficult as
due may release the obligor, it must first be to be manifestly beyond the contemplation of the
announced to the persons interested in the parties, the obligor may also be released therefrom,
fulfillment of the obligation. in whole or in part.130

The consignation shall be ineffectual if it is

not made strictly in consonance with the provisions
which regulate payment.123

Consignation shall be made by depositing

the things due at the disposal of judicial authority, C. Condonation or Remission of
before whom the tender of payment shall be proved, Debt131
in a proper case, and the announcement of the
consignation in other cases. 126
Art. 1260
127
Art. 1261
The consignation having been made, the 128
Art. 1262
interested parties shall also be notified thereof.124
129
Art. 1266
130
Art. 1267
131
an act of liberality by virtue of w/c, w/o receiving any
The expenses of consignation, when equivalent, the creditor renounces enforcement of an
properly made, shall be charged against the obligation w/c is extinguished in whole or in part.
creditor.125 Four (4) requisites:
1. Debt that is existing. You can remit a debt even
before it is due.
2. Renunciation must be gratuitous. If renunciation
is for a consideration, the mode of extinguishment may be
120
Art. 1253 something else. It may be novation, compromise of dacion en
121
Art. 1254 pago.
122
Art.1256 3. Acceptance by the debtor
123
Art. 1257 4. Capacity of the parties.
124
Art. 1258 The form of donation must be observed. If the condonation
125
Art. 1259 involves movables, apply Art. 748. If it involves immovables,
11
 1. Express – Formality of (2) That both debts consist in a sum of money, or if
Donation – the things due are consumable, they be of the same
kind, and also of the same quality if the latter has
Condonation or remission is essentially been stated;
gratuitous, and requires the acceptance by the
obligor. It may be made expressly or impliedly. (3) That the two debts be due;

One and the other kind shall be subject to (4) That they be liquidated and demandable;
the rules which govern inofficious donations.
Express condonation shall, furthermore, comply (5) That over neither of them there be any retention
with the forms of donation.132 or controversy, commenced by third persons and
communicated in due time to the debtor.138
2. Implied
a. Legal
The delivery of a private document compensation
evidencing a credit, made voluntarily by the creditor
to the debtor, implies the renunciation of the action Compensation takes place by operation of
which the former had against the latter. law, even though the debts may be payable at
different places, but there shall be an indemnity for
If in order to nullify this waiver it should be expenses of exchange or transportation to the place
claimed to be inofficious, the debtor and his heirs of payment.139
may uphold it by proving that the delivery of the
document was made in virtue of payment of the Compensation shall not be proper when one
debt.133 of the debts arises from a depositum or from the
obligations of a depositary or of a bailee in
Whenever the private document in which the
commodatum.
debt appears is found in the possession of the
debtor, it shall be presumed that the creditor
Neither can compensation be set up against
delivered it voluntarily, unless the contrary is
a creditor who has a claim for support due by
proved.134
gratuitous title, without prejudice to the provisions
It is presumed that the accessory obligation of paragraph 2 of article 301.140
of pledge has been remitted when the thing pledged, Neither shall there be compensation if one
after its delivery to the creditor, is found in the of the debts consists in civil liability arising from a
possession of the debtor, or of a third person who penal offense.141
owns the thing.135
If a person should have against him several
D. Confusion debts which are susceptible of compensation, the
rules on the application of payments shall apply to
The obligation is extinguished from the time the order of the compensation.142
the characters of creditor and debtor are merged in
the same person.136 When all the requisites mentioned in article
1279 are present, compensation takes effect by
E. Compensation operation of law, and extinguishes both debts to the
concurrent amount, even though the creditors and
1. Kinds debtors are not aware of the compensation.143

Compensation shall take place when two b. Agreement

persons, in their own right, are creditors and debtors
of each other.137 The parties may agree upon the
compensation of debts which are not yet due.144
In order that compensation may be proper, it
is necessary: c. Voluntary145

(1) That each one of the obligors be bound d. Judicial

principally, and that he be at the same time a
principal creditor of the other; If one of the parties to a suit over an
obligation has a claim for damages against the
apply Art. 749. But note that the creditor may just refuse to
collect (w/o observing any form.) In this case, the obligation
will be extinguished not by virtue of condonation but by 138
Art. 1279
waiver under Art. 6. 139
Art. 1286
132
Art. 1270 140
Art. 1287
133
Art. 1271 141
Art. 1288
134
Art. 1272 142
Art. 1289
135
Art. 1274 143
Art. 1290
136
Art. 1275 144
Art. 1282
137
Art. 1278 145
See (b) Agreement
12
other, the former may set it off by proving his right latter against the original obligor, except when said
to said damages and the amount thereof.146 insolvency was already existing and of public
e. Facultative knowledge, or known to the debtor, when the
delegated his debt.154
Takes place when compensation is
claimable by only one of the parties but not of the When the principal obligation is
other.147 extinguished in consequence of a novation,
accessory obligations may subsist only insofar as
2. Obligations not they may benefit third persons who did not give
compensable their consent.155

Compensation shall not be proper when one If the new obligation is void, the original
of the debts arises from a depositum or from the one shall subsist, unless the parties intended that the
obligations of a depositary or of a bailee in former relation should be extinguished in any
commodatum. event.156

Neither can compensation be set up against The novation is void if the original
a creditor who has a claim for support due by obligation was void, except when annulment may
gratuitous title, without prejudice to the provisions be claimed only by the debtor or when ratification
of paragraph 2 of article 301.148 validates acts which are voidable.157

Neither shall there be compensation if one If the original obligation was subject to a
of the debts consists in civil liability arising from a suspensive or resolutory condition, the new
penal offense.149 obligation shall be under the same condition, unless
it is otherwise stipulated.158
F. Novation
Subrogation of a third person in the rights of
Obligations may be modified by: the creditor is either legal or conventional. The
former is not presumed, except in cases expressly
(1) Changing their object or principal conditions; mentioned in this Code; the latter must be clearly
established in order that it may take effect.159
(2) Substituting the person of the debtor;
Conventional subrogation of a third person
(3) Subrogating a third person in the rights of the requires the consent of the original parties and of
creditor.150 the third person.160

In order that an obligation may be It is presumed that there is legal

extinguished by another which substitute the same, subrogation:
it is imperative that it be so declared in unequivocal
terms, or that the old and the new obligations be on (1) When a creditor pays another creditor who is
every point incompatible with each other.151 preferred, even without the debtor's knowledge;

Novation which consists in substituting a (2) When a third person, not interested in the
new debtor in the place of the original one, may be obligation, pays with the express or tacit approval
made even without the knowledge or against the of the debtor;
will of the latter, but not without the consent of the
creditor. Payment by the new debtor gives him the (3) When, even without the knowledge of the
rights mentioned in articles 1236 and 1237.152 debtor, a person interested in the fulfillment of the
obligation pays, without prejudice to the effects of
If the substitution is without the knowledge confusion as to the latter's share.161
or against the will of the debtor, the new debtor's
insolvency or non-fulfillment of the obligations Subrogation transfers to the persons
shall not give rise to any liability on the part of the subrogated the credit with all the rights thereto
original debtor.153 appertaining, either against the debtor or against
third person, be they guarantors or possessors of
The insolvency of the new debtor, who has mortgages, subject to stipulation in a conventional
been proposed by the original debtor and accepted subrogation.162
by the creditor, shall not revive the action of the
154
Art. 1295
146
Art. 1283 155
Art. 1296
147
e.g., Arts. 1287, 1288 156
Art. 1297
148
Art. 1287 157
Art. 1298
149
Art. 1288 158
Art. 1299
150
Art. 1291 159
Art. 1300
151
Art. 1292 160
Art. 1301
152
Art. 1293 161
Art. 1302
153
Art. 1294 162
Art. 1303
13
 specifying therein the property donated and the
A creditor, to whom partial payment has value of the charges which the donee must satisfy.
been made, may exercise his right for the
remainder, and he shall be preferred to the person The acceptance may be made in the same
who has been subrogated in his place in virtue of deed of donation or in a separate public document,
the partial payment of the same credit.163 but it shall not take effect unless it is done during
the lifetime of the donor.

If the acceptance is made in a separate

instrument, the donor shall be notified thereof in an
CONTRACT authentic form, and this step shall be noted in both
S instruments.166

I. Essential Requisites 2. Partnership where real

property contributed
There is no contract unless the following
requisites concur: A partnership may be constituted in any
form, except where immovable property or real
(1) Consent of the contracting parties; rights are contributed thereto, in which case a public
(2) Object certain which is the subject matter of the
instrument shall be necessary.167
contract;
(3) Cause of the obligation which is established.164 A contract of partnership is void, whenever
immovable property is contributed thereto, if an
II. Kinds of Contracts inventory of said property is not made, signed by
the parties, and attached to the public instrument.168
A. Consensual - perfected by mere
consent and from that moment, 3. Antichresis
the parties are bound not only to
the fulfillment of what has been The amount of the principal and of the
expressly stipulated but also to interest shall be specified in writing; otherwise, the
all consequences which, contract of antichresis shall be void.169
according to their nature may be 4. Agency to sell real
in keeping with good faith, usage property or an interest
and law. therein

B. Real - like deposit, pledge and When a sale of a piece of land or any
commodatum requires delivery of interest therein is through an agent, the authority of
object for perfection. the latter shall be in writing; otherwise, the sale
shall be void.170
C. Formal or Solemn –
5. Stipulation to charge
Requires compliance with certain formalities interest
prescribed by law, such prescribed form being an
essential element No interest shall be due unless it has been
expressly stipulated in writing.171
1. Donations
6. Stipulation limiting
The donation of a movable may be made common carrier’s duty of
orally or in writing. extraordinary diligence to
ordinary diligence
An oral donation requires the simultaneous
delivery of the thing or of the document A stipulation between the common carrier
representing the right donated. and the shipper or owner limiting the liability of the
former for the loss, destruction, or deterioration of
If the value of the personal property donated
exceeds five thousand pesos, the donation and the the goods to a degree less than extraordinary
acceptance shall be made in writing. Otherwise, the diligence shall be valid, provided it be:
donation shall be void.165

In order that the donation of an immovable 166

Art. 749
may be valid, it must be made in a public document, 167
Art. 1771
168
Art. 1773
163
Art. 1304 169
Art. 2134
164
Art. 1381 170
Art. 1874
165
Art. 748 171
Art. 1956
14
 (1) In writing, signed by the shipper or therein are governed by articles 1403, No. 2, and
owner; 1405;
(2) Supported by a valuable consideration
(2) The cession, repudiation or renunciation of
other than the service rendered by the
hereditary rights or of those of the conjugal
common carrier; and partnership of gains;
(3) Reasonable, just and not contrary to
public policy.172 (3) The power to administer property, or any other
power which has for its object an act appearing or
7. Chattel mortgage which should appear in a public document, or
By a chattel mortgage, personal property is should prejudice a third person;
recorded in the Chattel Mortgage Register as a
security for the performance of an obligation. If the (4) The cession of actions or rights proceeding from
movable, instead of being recorded, is delivered to an act appearing in a public document.
the creditor or a third person, the contract is a
pledge and not a chattel mortgage.173 All other contracts where the amount
involved exceeds five hundred pesos must appear in
8. Sale of large cattle writing, even a private one. But sales of goods,
chattels or things in action are governed by articles,
The sale of large cattle is governed by 1403, No. 2 and 1405.178
special law174 which requires that the same be in a
public instrument. IV. Defective Contracts

No person, partnership, association, A. Rescissible Contracts179

corporation or entity shall engage in the business of
buy and sell of large cattle without first securing a The following contracts are rescissible:
permit for the said purpose from the Provincial
Commander of the province where it shall conduct (1) Those which are entered into by guardians
such business and the city/municipal treasurer of the whenever the wards whom they represent suffer
place of residence of such person, partnership, lesion by more than one-fourth of the value of the
association, corporation or entity. The permit shall things which are the object thereof;
only be valid in such province.175
(2) Those agreed upon in representation of
III. Formality absentees, if the latter suffer the lesion stated in the
preceding number;
Contracts shall be obligatory, in whatever
form they may have been entered into, provided all (3) Those undertaken in fraud of creditors when the
the essential requisites for their validity are present. latter cannot in any other manner collect the claims
However, when the law requires that a contract be due them;
in some form in order that it may be valid or
enforceable, or that a contract be proved in a certain (4) Those which refer to things under litigation if
way, that requirement is absolute and indispensable. they have been entered into by the defendant
In such cases, the right of the parties stated in the without the knowledge and approval of the litigants
following article cannot be exercised.176 or of competent judicial authority;

If the law requires a document or other (5) All other contracts specially declared by law to
special form, as in the acts and contracts be subject to rescission.180
enumerated in the following article, the contracting
parties may compel each other to observe that form, (6) Payments made in a state of insolvency on
once the contract has been perfected. This right may account of obligations not yet enforceable
be exercised simultaneously with the action upon
the contract.177 1. Difference with
Rescission (resolution)
The following must appear in a public
document: The power to rescind obligations is implied
in reciprocal ones, in case one of the obligors
(1) Acts and contracts which have for their object should not comply with what is incumbent upon
the creation, transmission, modification or him.
extinguishment of real rights over immovable
property; sales of real property or of an interest The injured party may choose between the
fulfillment and the rescission of the obligation, with
172
Art. 1744
173
Art. 2140 178
Art. 1358
174
Act No. 1147 179
Contracts validly agreed upon but, by reason of lesion or
175
Sec. 5, P.D. 533 economic prejudice may be rescinded in cases established by
176
Art. 1356 law.
177
Art. 1357 180
Art. 1381
15
the payment of damages in either case. He may also drunkenness or during a hypnotic spell are
seek rescission, even after he has chosen voidable.183
fulfillment, if the latter should become impossible.
The incapacity declared in article 1327 is
The court shall decree the rescission subject to the modifications determined by law, and
claimed, unless there be just cause authorizing the is understood to be without prejudice to special
fixing of a period. disqualifications established in the laws.184

This is understood to be without prejudice to A contract where consent is given through

the rights of third persons who have acquired the mistake, violence, intimidation, undue influence, or
thing, in accordance with articles 1385 and 1388 fraud is voidable.185
and the Mortgage Law.181
In order that mistake may invalidate
Rescission in Rescission Proper consent, it should refer to the substance of the thing
Article 1191 in Article 1381 which is the object of the contract, or to those
1. It is a principal 1. It is a subsidiary
action retaliatory in remedy. conditions which have principally moved one or
character. both parties to enter into the contract.
2. The only ground is 2. There are 5
non-performance of grounds to rescind.
one’s obligation/s or Non-performance by
Mistake as to the identity or qualifications of
what is incumbent the other party is not one of the parties will vitiate consent only when
upon him. important. such identity or qualifications have been the
3. It applies only to 3. It applies to both principal cause of the contract.
reciprocal obligation unilateral and
reciprocal
obligations. A simple mistake of account shall give rise
4. Only a party to the 4. Even a 3rd person to its correction.186
contract may demand who is prejudiced by
fulfillment or seek the contract may When one of the parties is unable to read, or
the rescission of the demand the if the contract is in a language not understood by
contract. rescission of the him, and mistake or fraud is alleged, the person
contract.
5. Court may fix a 5. Court cannot grant
enforcing the contract must show that the terms
period or grant extension of time for thereof have been fully explained to the former.187
extension of time for fulfillment of the
the fulfillment of the obligation.
obligation.
There is no mistake if the party alleging it
6. Its purpose is to 6. Its purpose is to knew the doubt, contingency or risk affecting the
cancel the contract. seek reparation for object of the contract.188
the damage or injury
caused, thus allowing
partial rescission of Mutual error as to the legal effect of an
the contract. agreement when the real purpose of the parties is
frustrated, may vitiate consent.189

B. Voidable Contracts182 There is violence when in order to wrest

consent, serious or irresistible force is employed.
Contracts entered into during a lucid interval
are valid. Contracts agreed to in a state of There is intimidation when one of the
contracting parties is compelled by a reasonable and
well-grounded fear of an imminent and grave evil
181
Art. 1191 upon his person or property, or upon the person or
182
Art. 1409 property of his spouse, descendants or ascendants,
Those in which all of the essential elements for validity are to give his consent.
present, although the element of consent is vitiated either by
lack of capacity of one of the contracting parties or by To determine the degree of intimidation, the
VIMFU.
What contracts are voidable: age, sex and condition of the person shall be borne
1. Those where one of the parties is incapable of giving in mind.
consent to a contract
2. Those where the consent is vitiated by mistake, violence, A threat to enforce one's claim through
intimidation, undue influence or fraud competent authority, if the claim is just or legal,
3. By loss of the thing which is the object of the contract
through fraud or fault of the person who is entitled to annul
does not vitiate consent.190
the contract.
Ratification
Requisites:
a. there must be knowledge of the reason which renders the
contract voidable
183
Art. 1328
b. such reason must have ceased and
184
Art. 1329
c. the injured party must have executed an act which expressly
185
Art. 1330
or impliedly conveys an intention to waive his right
186
Art. 1331
If the object is lost through fortuitous event, the contract can
187
Art. 1332
still be annulled, but the person obliged to return the same can
188
Art. 1333
be held liable only for the value of the thing at the time of 189
Art. 1334
Art. 1409 190
Art. 1335
16
 Violence or intimidation shall annul the (2) Those where the consent is vitiated by mistake,
obligation, although it may have been employed by violence, intimidation, undue influence or fraud.
a third person who did not take part in the
contract.191 These contracts are binding, unless they are
annulled by a proper action in court. They are
There is undue influence when a person susceptible of ratification.200
takes improper advantage of his power over the will
of another, depriving the latter of a reasonable The action for annulment shall be brought
freedom of choice. The following circumstances within four years.
shall be considered: the confidential, family, This period shall begin:
spiritual and other relations between the parties, or
the fact that the person alleged to have been unduly In cases of intimidation, violence or undue
influenced was suffering from mental weakness, or influence, from the time the defect of the consent
was ignorant or in financial distress.192 ceases.

There is fraud when, through insidious In case of mistake or fraud, from the time of the
words or machinations of one of the contracting discovery of the same.
parties, the other is induced to enter into a contract
which, without them, he would not have agreed And when the action refers to contracts
to.193 entered into by minors or other incapacitated
persons, from the time the guardianship ceases.201
Failure to disclose facts, when there is a
duty to reveal them, as when the parties are bound Ratification extinguishes the action to annul
by confidential relations, constitutes fraud.194 a voidable contract.202

The usual exaggerations in trade, when the Ratification may be effected expressly or
other party had an opportunity to know the facts, are tacitly. It is understood that there is a tacit
not in themselves fraudulent.195 ratification if, with knowledge of the reason which
renders the contract voidable and such reason
A mere expression of an opinion does not having ceased, the person who has a right to invoke
signify fraud, unless made by an expert and the it should execute an act which necessarily implies
other party has relied on the former's special an intention to waive his right.203
knowledge.196
Ratification may be effected by the guardian
Misrepresentation by a third person does not of the incapacitated person.204
vitiate consent, unless such misrepresentation has
created substantial mistake and the same is Ratification does not require the conformity
mutual.197 of the contracting party who has no right to bring
the action for annulment.205
Misrepresentation made in good faith is not
fraudulent but may constitute error.198 Ratification cleanses the contract from all its
defects from the moment it was constituted.206
In order that fraud may make a contract
voidable, it should be serious and should not have The action for the annulment of contracts
been employed by both contracting parties. may be instituted by all who are thereby obliged
principally or subsidiarily. However, persons who
Incidental fraud only obliges the person are capable cannot allege the incapacity of those
employing it to pay damages.199 with whom they contracted; nor can those who
exerted intimidation, violence, or undue influence,
The following contracts are voidable or or employed fraud, or caused mistake base their
annullable, even though there may have been no action upon these flaws of the contract.207
damage to the contracting parties:
An obligation having been annulled, the
(1) Those where one of the parties is incapable of contracting parties shall restore to each other the
giving consent to a contract; things which have been the subject matter of the
contract, with their fruits, and the price with its
interest, except in cases provided by law.

191
Art. 1336
192
Art. 1337 200
Art. 1390
193
Art. 1338 201
Art. 1391
194
Art. 1339 202
Art. 1392
195
Art. 1340 203
Art. 1393
196
Art. 1341 204
Art. 1394
197
Art. 1342 205
Art. 1395
198
Art. 1343 206
Art. 1396
199
Art. 1344 207
Art. 1397
17
 In obligations to render service, the value The following contracts are unenforceable,
thereof shall be the basis for damages.208 unless they are ratified:

When the defect of the contract consists in (1) Those entered into in the name of another
the incapacity of one of the parties, the person by one who has been given no authority or
incapacitated person is not obliged to make any legal representation, or who has acted beyond his
restitution except insofar as he has been benefited powers;
by the thing or price received by him.209
(2) Those that do not comply with the Statute of
Frauds as set forth in this number. In the following
Whenever the person obliged by the decree
cases an agreement hereafter made shall be
of annulment to return the thing can not do so
unenforceable by action, unless the same, or some
because it has been lost through his fault, he shall
note or memorandum, thereof, be in writing, and
return the fruits received and the value of the thing
subscribed by the party charged, or by his agent;
at the time of the loss, with interest from the same
evidence, therefore, of the agreement cannot be
date.210
received without the writing, or a secondary
evidence of its contents:
The action for annulment of contracts shall
be extinguished when the thing which is the object (a) An agreement that by its terms is not to
thereof is lost through the fraud or fault of the be performed within a year from the making
person who has a right to institute the proceedings. thereof;

If the right of action is based upon the (b) A special promise to answer for the debt,
incapacity of any one of the contracting parties, the default, or miscarriage of another;
loss of the thing shall not be an obstacle to the
success of the action, unless said loss took place (c) An agreement made in consideration of
through the fraud or fault of the plaintiff.211 marriage, other than a mutual promise to
marry;
As long as one of the contracting parties
does not restore what in virtue of the decree of
annulment he is bound to return, the other cannot be (d) An agreement for the sale of goods,
compelled to comply with what is incumbent upon chattels or things in action, at a price not less
him.212 than five hundred pesos, unless the buyer
accept and receive part of such goods and
chattels, or the evidences, or some of them,
of such things in action or pay at the time
some part of the purchase money; but when
a sale is made by auction and entry is made
by the auctioneer in his sales book, at the
time of the sale, of the amount and kind of
property sold, terms of sale, price, names of
the purchasers and person on whose account
the sale is made, it is a sufficient
memorandum;
(e) An agreement for the leasing for a longer
period than one year, or for the sale of real
property or of an interest therein;
2. Special promise to answer for the debt, default or
miscarriage of another;
C. Unenforceable Contracts213 This does not refer to the original or independent promise of
the debtor to his own creditor. It refers rather to a collateral
promise.
3. Agreement in consideration of marriage other than a mutual
208
Art. 1398 promise to marry;
209
Art. 1399 4. Agreement for the sale of goods, etc. at a price not less than
210
Art. 1400 P500.00;
211
Art. 1401 5. Contracts of lease for a period longer than one year;
212
Art. 1402 6. Agreements for the sale of real property or interest therein;
213
Those which cannot be enforced by proper action in court and
unless they are ratified 7. Representation as to the credit of a third person.
What contracts are unenforceable The contracts/agreements under the Statute of Frauds require
1. those entered into in the name of another by one without or that the same be evidenced by some note, memorandum or
acting in excess of authority; writing, subscribed by the party charged or by his agent,
2. those where both parties are incapable of giving consent; otherwise, the said contracts shall be unenforceable.
and The statute of frauds applies only to executory contracts, not
3. those which do not comply with the Statute of Frauds to those that are partially or completely fulfilled.
Agreements within the scope of the Statute of Frauds Ratification of contracts in violation of the Statute of Frauds
(exclusive list): 1. Failure to object to the presentation of oral evidence to
1. Agreements not to be performed within one year from the prove such contracts
making thereof; 2. Acceptance of benefits under these contracts
18
 (4) Those whose object is outside the commerce of
( f ) A representation as to the credit of a men;
third person. (5) Those which contemplate an impossible service;
(6) Those where the intention of the parties relative
(3) Those where both parties are incapable of giving to the principal object of the contract cannot be
consent to a contract.214 ascertained;
(7) Those expressly prohibited or declared void by
Unauthorized contracts are governed by
law.
article 1317 and the principles of agency in Title X
of this Book.215
These contracts cannot be ratified. Neither
Contracts infringing the Statute of Frauds, can the right to set up the defense of illegality be
referred to in No. 2 of article 1403, are ratified by waived.220
the failure to object to the presentation of oral
evidence to prove the same, or by the acceptance of An absolutely simulated or fictitious
benefit under them.216 contract is void. A relative simulation, when it does
not prejudice a third person and is not intended for
When a contract is enforceable under the any purpose contrary to law, morals, good customs,
Statute of Frauds, and a public document is public order or public policy binds the parties to
necessary for its registration in the Registry of their real agreement.221
Deeds, the parties may avail themselves of the right
under Article 1357.217 1. Pactum commissorium
In a contract where both parties are The following contracts are voidable or
incapable of giving consent, express or implied, annullable, even though there may have been no
ratification by the parent, or guardian, as the case damage to the contracting parties:
may be, of one of the contracting parties shall give
the contract the same effect as if only one of them (1) Those where one of the parties is incapable of
were incapacitated. giving consent to a contract;
If ratification is made by the parents or
guardians, as the case may be, of both contracting (2) Those where the consent is vitiated by mistake,
parties, the contract shall be validated from the violence, intimidation, undue influence or fraud.
inception.
These contracts are binding, unless they are
No one may contract in the name of another annulled by a proper action in court. They are
without being authorized by the latter, or unless he susceptible of ratification.222
has by law a right to represent him.
The creditor cannot appropriate the things
A contract entered into in the name of given by way of pledge or mortgage, or dispose of
another by one who has no authority or legal them. Any stipulation to the contrary is null and
representation, or who has acted beyond his powers, void.223
shall be unenforceable, unless it is ratified,
expressly or impliedly, by the person on whose 2. Pactum de non alienando
behalf it has been executed, before it is revoked by
the other contracting party.218 A stipulation forbidding the owner from
alienating the immovable mortgaged shall be
D. Void Contracts219
void.224
The following contracts are inexistent and
3. Pactum leonina
void from the beginning:
A stipulation which excludes one or more
(1) Those whose cause, object or purpose is
partners from any share in the profits or losses is
contrary to law, morals, good customs, public order
void.225
or public policy;
(2) Those which are absolutely simulated or
Comparative table of defective
fictitious;
contracts
(3) Those whose cause or object did not exist at the
time of the transaction;

214
Art. 1403
215
Art. 1404
216
Art. 1405

217
Art. 1406
220
Art. 1409
218
Art. 1407
221
Art. 1346
219
Those where all of the requisites of a contract are present
222
Art. 1390
but the cause, object or purpose is contrary to law, morals,
223
Art. 2088
good customs, public order or public policy, or contract itself 224
Art. 2130
is prohibited or declared void by law. 225
Art. 1799
19
VOID VOIDABLE RESCISSIBLE UNENFORCEABLE

1. Defect is caused Defect is caused by vice Defect is caused by Defect is caused by

by lack of essential of consent injury/ damage either lack of form,
elements or illegality to one of the parties of authority, or capacity
to a 3rd person of both parties not
cured by prescription

2. Do not, as a Valid and enforceable Valid and enforceable Cannot be enforced

general rule produce until they are annulled until they are rescinded by a proper action in
any legal effect by a competent court by a competent court court

3. Action for the Action for annulment or Action for rescission Corresponding action
declaration or nullity defense of annulability may prescribe for recovery, if there
or inexistence or may prescribe was total or partial
defense of nullity or performance of the
inexistence does not unenforceable
prescribe contract under No. 1
or 3 of Article 1403
may prescribe

4. Not cured by Cured by prescription Cured by prescription Not cured by

prescription prescription

5. Cannot be ratified Can be ratified Need not be ratified Can be ratified

6. Assailed not only Assailed only by a Assailed not only by a Assailed only by a
by a contracting contracting party contracting party but contracting party
party but even by a even by a third person
third person whose who is prejudiced or
interest is directly damaged by the
affected contract

7. Assailed directly Assailed directly or Assailed directly only Assailed directly or

or collaterally collaterally collaterally

20
V. Effect of Contracts

Contracts take effect only between the parties, their assigns and heirs, except in case where the rights
and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision
of law. The heir is not liable beyond the value of the property he received from the decedent.

If a contract should contain some stipulation in favor of a third person, he may demand its fulfillment
provided he communicated his acceptance to the obligor before its revocation. A mere incidental benefit or
interest of a person is not sufficient. The contracting parties must have clearly and deliberately conferred a favor
upon a third person.226

226
Art. 1311
21