If this is not complied with, the contract is still

CHAPTER 3 valid. It is still enforceable. However, under

Form of Contracts this article, the party may file a case and
compel the other party to observe the proper
Article 1356. Contracts shall be obligatory, form of the contract.
in whatever form they may have been
entered into, provided all the essential Article 1358. The following must appear in
requisites for their validity are present. a public document:
However, when the law requires that a
contract be in some form in order that it may (1) Acts and contracts which have for their
be valid or enforceable, or that a contract be object the creation, transmission,
proved in a certain way, that requirement is modification or extinguishment of real rights
absolute and indispensable. In such cases, over immovable property; sales of real
the right of the parties stated in the following property or of an interest therein are
article cannot be exercised. (1278a) governed by articles 1403, No. 2, and 1405;

As a general rule, a contract has no form. Form (2) The cession, repudiation or renunciation
does not matter for the validity of a contract. It of hereditary rights or of those of the
is enough that the essential elements of the conjugal partnership of gains;
contract (consent, subject matter, and cause)
must be present. (3) The power to administer property, or any
other power which has for its object an act
This rule, however, applies only to consensual appearing or which should appear in a public
contracts. In formal contracts, the formalities document, or should prejudice a third
required by law must be followed for its person;
validity or enforceability. Also, in real
contracts, it is required that delivery of the (4) The cession of actions or rights
object must be made for its perfection in proceeding from an act appearing in a public
addition to consent, object, and cause. document.

To streamline the exceptions, when is form All other contracts where the amount
required? involved exceeds five hundred pesos must
A: Form is required in contracts in the appear in writing, even a private one. But
following cases: sales of goods, chattels or things in action are
governed by articles, 1403, No. 2 and 1405.
1. When the law requires that a contract (1280a)
be in some form to be valid;
2. When the law requires that a contract These are contracts which appear in a public
be in a form to be enforceable or proved document. This means that the contract must
in a certain way; or, be notarized by a lawyer.
3. When the law requires that a contract
be in some form for the convenience of Q: What is the effect if these contracts are not
the parties or for the purpose of in a public instrument?
affecting third persons. A: The contract is still valid. But the other party
may avail of article 1357 – he may compel the
other to execute the proper document.
Article 1357. If the law requires a document
or other special form, as in the acts and Q: What is the purpose of this article in relation
contracts enumerated in the following to the existing contract?
article, the contracting parties may compel A: The requirement of forms for these contract
each other to observe that form, once the is only for purposes of convenience. This article
contract has been perfected. This right may does not have anything to do with the validity
be exercised simultaneously with the action or enforceability of a contract.
upon the contract. (1279a)
CHAPTER 4
In certain cases, a certain form is required for Reformation of Instruments (n)
the convenience of the parties. Like for
example, in a deed of sale of real property, it is Article 1359. When, there having been a
required that the deed must be in a public meeting of the minds of the parties to a
instrument and msut be registered in the contract, their true intention is not expressed
property registry to affect third person. in the instrument purporting to embody the

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 agreement, by reason of mistake, fraud, Article 1360. The principles of the general
inequitable conduct or accident, one of the law on the reformation of instruments are
parties may ask for the reformation of the hereby adopted insofar as they are not in
instrument to the end that such true conflict with the provisions of this Code.
intention may be expressed.
In case of conflict between the civil code and
If mistake, fraud, inequitable conduct, or the principles of general law on the
accident has prevented a meeting of the reformation, the civil code shall prevail. The
minds of the parties, the proper remedy is general law will only have a suppletory effect.
not reformation of the instrument but
annulment of the contract. Article 1361. When a mutual mistake of the
parties causes the failure of the instrument to
Reformation is a remedy allowed by law by disclose their real agreement, said
means of which a written instrument is instrument may be reformed.
amended or rectified so as to express or
conform to the real agreement or intention of Reformation may also be availed of the
the parties when, by reason of mistake, fraud, mistake of the parties is mutual. This is the
inequitable conduct, or accident, the mistake of fact that is common to the parties of
instrument fails to express such agreement or the instrument which cause the failure of the
intention. instrument to reflect its true intentions.

Q: What is the reason for reformation? Article 1362. If one party was mistaken and
A: The reason behind reformation is equity. the other acted fraudulently or inequitably in
Equity dictates that an instrument should be such a way that the instrument does not
reformed so that the intention of the show their true intention, the former may
contracting parties may be expressed. ask for the reformation of the instrument.
Q: What are the requirements for reformation Article 1362 basically means that only the
of instrument? party in good faith can cause the action for
A: The following are the requirements for reformation. The guilty party cannot go to
reformation may be availed as a remedy: court and ask for reformation. One who goes
to court must come with clean hands.
1. There is a meeting of the minds of the
parties to the contract; Also, this article presupposes that the mistake
2. The written instrument does not is unilateral but the other party acted
express the true agreement or intention fraudulently or inequitably.
of the parties;
3. The failure to express the true intention Article 1363. When one party was mistaken
is due to mistake, fraud, inequitable
and the other knew or believed that the
conduct, or accident;
instrument did not state their real agreement,
4. The facts upon which reformation of
but concealed that fact from the former, the
instrument is sought are put in issue by
instrument may be reformed.
the pleadings; and,
5. There is a clear and convincing
Q: What is the situation contemplated in
evidence of mistake, fraud, inequitable
Article 1363?
conduct, or accident.
A: One party was mistaken. The other party
knew or believed that the instrument did not
Q: How is reformation different from
state their real agreement and concealed such
annulment?
from the other.
A: Reformation presupposes that there is a
meeting of the minds of the parties. But the
In this situation, the mistaken party in good
document does not reflect the true intention of
faith may ask for the reformation of the
the parties because of fraud, mistake,
instrument.
inequitable conduct, or accident.

In annulment, it can be said that there is no Article 1364. When through the ignorance,
meeting of the minds because the consent of lack of skill, negligence or bad faith on the
one of the parties has been vitiated by fraud, part of the person drafting the instrument or
intimidation, violence, undue influence or of the clerk or typist, the instrument does not
mistake. express the true intention of the parties, the
courts may order that the instrument be
reformed.

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 prescribed by law to control to a certain
Article 1364 is another instance where degree the disposition of his estate, to
reformation may be asked by the court. take effect after his death.

Q: What is the situation here? The making of wills, like donations, is

A: The instrument does not convey true strictly a personal or voluntary act.
intention of the parties because of:
1. Ignorance; 3. When the real agreement is void.
2. Lack of skill; or
3. Bad faith There is nothing to reform if the
On the part of the person drafting the agreement is void to begin with.
instrument.

In this situation, the other party may ask for the Article 1367. When one of the parties has
reformation of the instrument. brought an action to enforce the instrument,
he cannot subsequently ask for its
Article 1365. If two parties agree upon the reformation.
mortgage or pledge of real or personal
property, but the instrument states that the Article 1367 is an instance where reformation
property is sold absolutely or with a right of cannot prosper. The basis for this is estoppel,
repurchase, reformation of the instrument is waiver, or ratification of the defective contract.
proper.
Article 1368. Reformation may be ordered
This is another instance where reformation is at the instance of either party or his
allowed by law. successors in interest, if the mistake was
mutual; otherwise, upon petition of the
Q: What is the situation here? injured party, or his heirs and assigns.
A: The parties agreed to a mortgage or pledge
of real or personal property. However, the Q: Who are the parties entitled to reformation?
contents of the instrument is either: A: They are as follows:
1. An absolute sale; or
2. A sale with a right to repurchase. 1. Either of the parties if the mistake is
mutual;
In this instance, reformation may be had by 2. In all other cases, the injured parties; or
either of the parties. 3. The heirs or successors in interest in
lieu of the party entitled.
Article 1366. There shall be no reformation
in the following cases: Article 1369. The procedure for the
reformation of instrument shall be governed
(1) Simple donations inter vivos wherein no by rules of court to be promulgated by the
condition is imposed; Supreme Court.

(2) Wills;
CHAPTER 5
(3) When the real agreement is void. Interpretation of Contracts

Article 1366 are instances where reformation is Article 1370. If the terms of a contract are
not allowed under the law: clear and leave no doubt upon the intention
of the contracting parties, the literal meaning
1. Simple and unconditional donations. of its stipulations shall control.
Donation is an act of liberality whereby
a person disposes gratuitiously of a If the words appear to be contrary to the
thing or right in favor of another who evident intention of the parties, the latter
accepts it. shall prevail over the former. (1281)
If the donation is conditional, then Q: What is the reason for interpretation of
reformation may be had by the parties. contract?
A: As a general rule, interpretation of contract
2. Last will and testaments. is not necessary if the wordings of its terms and
conditions are clear. This means that there is
A will is an act whereby a person is
permitted with the formalities

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no doubt that arises from the wordings in the
contract. This article means that a contract should be
interpreted as a whole. The intention of the
However, when there is doubt that arises from parties is to be gathered from the entire
the words in the contract, then there arises a document, and not just from particular words.
need for its interpretation. The determination of the intention of the
parties to a contract is not to be done in a piece
Q: So, what is the rule in case of conflict meal basis where only portion of the contract
between the words of the contract and the will be considered.
evident intention of the parties? Which should
prevail? Article 1375. Words which may have
A: The true intention of the parties must different significations shall be understood in
prevail. that which is most in keeping with the nature
and object of the contract. (1286)
Article 1371. In order to judge the intention
of the contracting parties, their This article deals with words with different
contemporaneous and subsequent acts shall meanings. The meaning of the word which
be principally considered. (1282) renders the contract effectual is to be used.

Contemporaneous and subsequent acts shall be Article 1376. The usage or custom of the
considered in determining the true intention of place shall be borne in mind in the
the parties. This is especially true when the interpretation of the ambiguities of a
intention of the parties cannot be clearly contract, and shall fill the omission of
ascertained from the words used in their stipulations which are ordinarily established.
contract. (1287)

Article 1372. However general the terms of The usage or custom of the place where the
a contract may be, they shall not be contract was entered may be used to explain
understood to comprehend things that are what is doubtful or ambiguous in the contract.
distinct and cases that are different from
those upon which the parties intended to Article 1377. The interpretation of obscure
agree. (1283) words or stipulations in a contract shall not
favor the party who caused the obscurity.
As a rule, where in a contract there are general (1288)
and special provisions covering the same
subject matter, the latter control over the A contract may be drafted alone by a single
former when two cannot stand together. party. If there will be a doubt or obscurity in the
words used, the doubt or obscurity shall not
In this provision, when there are general terms favor the party who drafted the instrument.
in the contract, they shall mean those things Hence, in this case, the interpretation of such
which are intended the parties. The general stipulation shall favor the party who did not
terms shall exclude the things which are participate in the drafting of the instrument.
different from what the parties intended.
In other words, in case of doubt, a written
Article 1373. If some stipulation of any agreement should be interpreted against the
contract should admit of several meanings, it party who has drawn it.
shall be understood as bearing that import
which is most adequate to render it effectual. Article 1378. When it is absolutely
(1284) impossible to settle doubts by the rules
established in the preceding articles, and the
There are occasions where a stipulation is doubts refer to incidental circumstances of a
susceptible of several meanings. When that gratuitous contract, the least transmission of
happens, it shall mean that which is most rights and interests shall prevail. If the
adequate to make the contract effective and in contract is onerous, the doubt shall be settled
consideration of the intention of the parties. in favor of the greatest reciprocity of
interests.
Article 1374. The various stipulations of a
contract shall be interpreted together, If the doubts are cast upon the principal
attributing to the doubtful ones that sense object of the contract in such a way that it
which may result from all of them taken cannot be known what may have been the
jointly. (1285)

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 intention or will of the parties, the contract
shall be null and void. (1289)

Article 1378 lays down the rules for doubts in

the stipulations in the contract which are
impossible to settle.

There are two types of contracts here:

1. Gratuitous contracts – those whose
consideration is merely the liberality of
one party; and,
2. Onerous contracts – those with
valuable consideration..

If the contract is gratuitous, the interpretation

should be made which would result in the least
transmission of rights and interests.

For example: Leomord gave his horse to

Barats. It is not clear whether the agreement
was a donation or just a contract of deposit. If
the doubt cannot be settled, the contract
between them is merely a contract of deposit.
A contract of deposit confers the least
transmission of rights because, unlike
donation, there is no transfer of ownership, and
Leomord may recover back his horse.

If the contract is onerous, the doubts should be

settled in favor of the greatest reciprocity of
rights.

For example: Carmilla borrowed money from

Cecilion at 6% per annum interest. The
maturity date of the loan cannot be determined
whether it’s only for 6 months or 1 year.

In this case, it must be assumed that the loan

agreement is for one year because (1) the
interest rate is at 6% per annum; and (2) the
interpretation confers the greatest reciprocity of
rights – Carmilla will have a longer period to
pay and Cecilion will have more interest.

Article 1379. The principles of

interpretation stated in Rule 123 of the Rules
of Court shall likewise be observed in the
construction of contracts. (n)

The Rules of Court on interpretation of

documents can also be used as a source in
interpreting the terms of a contract.

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