ARTICLE 1262An obligation that consists of delivering something determinate is extinguished if it is lost or detroyed, but if it's his fault or he delayed in the first place, then he's still liable.

– Something is considered lost when it perishes, it cannot be recovered or its existence is unknown.

– Law or stipulation? Nature of obligation requires assumption of risk? Obligation arises from a crime? The obligor is still liable then, even for fortuitous events.

– PREREQUISITES: the thing is specific or determinate; loss occurs without fault of debtor; debtor did not delay.

ARTICLE 1263If the thing is lost, but it was generic, then obligation is not extinguished.

– A generic thing never perishes. → FIND A NEW ONE.

ARTICLE 1264The courts shall determine whether partial loss equals extinguishment.

– If a part is harmed or compromised, then courts na bahala if game parin.– Takes into consideration circumstances of obligation. Like, is the part that was lost the entire

point of the obligation? Can the obligation still function without that part?

ARTICLE 1265Assume the loss is the debtor's fault. But if there was a natural calamity, assume it wasn't.

ARTICLE 1266Obligation to do? If it becomes legally or physically impossible, obligation extinguished.

– Must be realized after constitution of obligation. → If the obligation is impossible from the beginning, the obligation is void.

– PHYSICALLY IMPOSSIBLE: physically incapacitated, or obligor dies.– LEGALLY IMPOSSIBLE: impossible by provision of law even though it is physically

possible.

ARTICLE 1267If the obligation is too hard to complete, wag nalang.

– Applicable to personal obligations to do and real obligations to give or deliver.

ARTICLE 1268If the obligation is because of a crime, the debtor still has to pay the price, whatever the cause, unless the person receiving says iz okay lung.

– If you stole it and harmed it, even if you give it back, you hafta pay parin, because you are at fault. Unless the dude says, wag na, bro, okay na tayo.

ARTICLE 1269If an obligation was extinguished because of loss, and someone else—but not the debtor—was responsible, the creditor can go after the other guy.

– Rights of action of the debtor are transferred to the creditor.

ARTICLE 1270Condonation or remission requires explicit or implicit acceptance by obligor.

– CONDONATION/REMISSION: creditor forgives debt. A form of donation.– REQUISITES: must be gratuitous [free of charge]; accepted by obligor; parties must have

capacity; must not be inofficious [contrary to moral obligation]; if made expressly, must

comply with forms of donation.– KINDS

1. EXTENTa. COMPLETE: when it covers the entire obligation.b. PARTIAL: does not cover entire obligation.

2. FORMa. EXPRESS: verbal or in writing.b. IMPLIED: can only be inferred from conduct.

2. DATE OF EFFECTIVITYa. INTER VIVOS: while still donor is still alive.b. MORTIS CUASA: effective when donor dies, must comply with will.

– since it's a donation, you can't give more than you can.

ARTICLE 1271If there is a private document from creditor to debtor saying iz all good, then you give up right of action. Wanna nullify? Must be inofficious, and the debtor has to agree with you.

– If obligation is joint, the presumption of remission is only to the share of the dude holding the document; if solidary, to the total obligation.

– Debtor must prove that document was in payment, not remission of debt.

ARTICLE 1272If private document where the debt appears is with the debtor already, presume the creditor delivered it voluntarily.

– And if he delivered it voluntarily, see 1271.– Normally kasi, the document with the debt is with the creditor., and if it's with him, then you

assume that it hasn't been paid yet. So if it's with the debtor, then the automatic assumption is the creditor gave it, meaning it's been paid.

– If there was no payment though and the debtor has the document already, then presume remission.

ARTICLE 1273Renunciation of principal obligations extinguishes all accessory obligations, but not vice versa.

– Accessary follows the principal, not the other way around.

ARTICLE 1274If a principal obligation has the accessary obligation of a pledge, once the pledge is found back with the debotor, then presume creditor said na the obligation can carry on without the pledge.

– When the debtor pledges something, he gives it to the creditor or a third party to keep [sort of as a guarantee] until the obligation is extinguished.

– Debtor is still indebted for principal obligation though. Suckerz.

ARTICLE 1275Obligation is extinguished once creditor and debtor become the same person.

– CONFUSION/MERGER: one person becoming the creditor and debtor in respect to the same obligation.

– REQUISITES: must take place between the principal debt and creditor; has to be complete.– Basta mega six-degree obligation happeningz.

ARTICLE 1276Merger extinguishes the principal obligation, so the accessory one follows also. However, if the accessory obligation is extinguished, that doesn't mean the principal one has been also.

– Extinguishment of accessory obligation of guarantee? Guarantor is off the hook.

ARTICLE 1277Confusion does not extinguish a joint obligation, unless it happens in all the debtors of the joint obligation.

– Because in a joint obligation, a debtor has a corresponding creditor [and vice versa], so if confusion happens, it only affects them. The amount however, doesn't change. The other debtors still owe the other creditors the same amount.

– In a solidary obligation, however, the entire obligation is extinguished. → Cause in a solidary obligation, there is only one obligation, and every debtor is individually responsible for the payment of the whole obligation. → Thus, a debtor can ask for reimbursement from other debtors for him “paying their shares.”

ARTICLE 1278Compensation will take place when two people are each others' creditors and debtors.

– COMPENSATION: extinguishment of the debts of two people who are each others' creditors and debtors. Basically balancing out the obligations and if there is excess, pay that nalang.

– COMPENSATION vs. CONFUSION1. Compensation is indirect payment; confusion is impossibility of payment.2. Compensation has two obligations; confusion has one.3. Compensation, both are creditors and debtors; confusion, one is creditor and debtor.

– KINDS1. EXTENT

a. TOTAL: both obligations balance out to the same amount. Entirely extinguished.b. PARTIAL: balance remains out of the meeting of both obligations.

2. CAUSE/ORIGINa. LEGAL: takes place by operation of law without knowledge of parties.b. VOLUNTARY: takes place by agreement of parties.c. JUDICIAL: ordered by court.d. FACULTATIVE: set up by one party.

ARTICLE 1279Prerequisites for compensation: obligations must be principal; both debts must be money or something consumable or of the same kind; both debts must be due; both debts are liquidated; no controversy by a third party.

ARTICLE 1280Accessory obligation of a guarantor is extinguished by total compensation.

– If it's partial compensation, guarantor is only liable to the remaining balance.– Guarantor has the right to set up compensation.

ARTICLE 1281Compensation may be total or partial.

ARTICLE 1282Compensation may be agreed upon if both debts are not yet due.

– Yes, it shits on article 1279.– Must be valid and agreed upon and blah blah.– Voluntary or conventional compensation such as this do not require the abovementioned

prerequisites.

ARTICLE 1283If one of the parties in a case over an obligation can claim for damages against the other, then the amount charged to the other can be used for compensation.

– Basically if you don't pay and the other guy goes psycho, then you can sue him for damages and then use whatever that was as compensation for whatever you had to pay.

ARTICLE 1284If debts are rescissible or voidable, they can be used for compensation before the courts rescind them.

– Rescissible and voidable obligations are valid until judicially rescinded.– BUT, wala ring point, okay, because should the annulment be retroactive, it's as if there was

no compensation in the first place.

ARTICLE 1285In compensation, rights can be reassigned, even to include a third party.

– If you give consent to assignment, then you lose the right to the defense of compensation versus a third party.

– COMPENSATION BEFORE ASSIGNMENT: Assuming you did compensation already, if you gave consent to assignment already, you have to do it all over again. The good thing is, everyone else has to as well. So although you are now liable to a third party, you can still collect from whoever was originally in the obligation.

– COMPENSATION AFTER ASSIGNMENT1. Assignment with the consent of debtor: if you reserve your right to the compensation while consenting to assignment, you are only liable to the remaining.2. Assignment with knowledge but without the consent of debtor: compensation is possible to debts before assignment was made, but not after. Affects “pending” debts.3. Assignment without knowledge of the debtor: compensation can be set up before or after assignment; important is when debtor learns of the assignment.

ARTICLE 1286When an exchange is made, compensation must also happen for the expenses incurred in order for the exchange to be made.

– Whoever claims compensation must pay for the expense of exchange.

ARTICLE 1287Compensation can't be done when one of the debts arises from a gratuitous act, like paying for bail money.

ARTICLE 1288Compensation can't be done if one of the debts is a civil liability arising from a crime.

– WHEN IS LEGAL COMPENSATION NOT ALLOWED BY LAW?1. One of the debts arises from a depositum: a DEPOSIT [same thing as depositum] is basically giving something to someone for safe-keeping. Breach of trust daw.2. One of the debts arises from a commodatum: a COMMODATUM is when you lend someone something not consumable to use for some time that will be eventually returned.3. One of the debts arises from a claim for support due by gratuitous title: basically has to do with your parents not saying that since they take care of you, it can't be used for compensation if you owe them a certain amount of money.4. One of the debts arises from civil liability arising from a penal offense: you can't use whatever you acquired illegally for compensation. However, if the victim wants it, then okay. Pertains only to the accused.

ARTICLE 1289If a person has several debts, the rules of application of payments will apply to the order of compensation.

– That is, you have to specify which debt you are paying, etc.

ARTICLE 1290When all prerequisites for compensation are present, compensation is automatic, even without the knowledge of the creditors and debtors.

– Consent of parties not required. → Compensation by mere operation of law.

ARTICLE 1291Obligations may be modified by changing the object or principal conditions; substituting the person of debtor; subrogating a third person in the rights of the creditor.

– NOVATION: relative extinguishment of an obligation by creating a new one in substitution of it.

– KINDS:1. ORIGIN

a. LEGAL: takes place by operation of law.b. CONVENTIONAL: takes place by agreement of parties.

2. HOW IT IS CONSTITUTEDa. EXPRESS: when it is declared in unequivocal terms.b. IMPLIED: when the old and the new obligations are essentially incompatible.

3. EXTENTa. TOTAL: old obligation completely gone.b. PARTIAL/MODIFICATORY: modifications to original obligation.

4. SUBJECTa. REAL/OBJECTIVE: change in object or principal conditions.b. PERSONAL/SUBJECTIVE: when the person of the debtor is substituted or the subrogation of a third person in the right of the creditor.c. MIXED: combination of real and personal.

ARTICLE 1292For novation to happen, it must be declared so in unequivocal terms.

– REQUISITES OF NOVATION: a previous valid obligation; capacity and intention of parties to modify or extinguish the obligation; modification or extinguishment of old obligation; creation of a new valid obligation.

– Novation is never presumed.– TEST OF INCOMPATABILITY: Whether they have an independent existence of each other.

→ They must both be impossible to make them incompatible, one has to give.

ARTICLE 1293In novation, you can substitute a new debtor even without the knowledge of the old debtor, but not without consent of the creditor.

– Payment by the new debtor allows him rights in 1236 and 1237.– KINDS OF PERSONAL NOVATION

1. SUBSTITUTION: debtor is substituted. Old debtor being released from his obligation is KEY.

a. EXPROMISION: new debtor takes initiative, old one doesn't know, with creditor consent. Right of new debtor who pays: beneficial reimbursement.b. DELEGACION: creditor accepts the new debtor to take old one's place, all parties [old debtor, new debtor, creditor] must agree. Right of new debtor who pays: reimbursement and subrogation.

2. SUBROGATION: a third person is subrogated in the rights of the creditor.

ARTICLE 1294If substitution is done without the knowledge or against the will of the old debtor, if the new one fucks up, he gets to stand at the sidelines and laugh.

– Only in expromision. The old debtor is liability-free.

ARTICLE 1295When the new debtor fucks up, you can't go back to the old debtor.

– Parang love. =))– Unless the new debtor's insolvency was known to the old debtor or was public knowledge

[even if old debtor didn't know] or was already existing. → Just insolvency though. If it's nonfulfillment, old debtor is still liability-free.

– Only in delegacion.

ARTICLE 1296When principal obligations are extinguished by novation, accessory obligations may exist only to benefit the third person who did not give consent to novation.

– If the third person gives consent, then never mind na talaga. =))

ARTICLE 1297If the new obligation is void, the old obligation will make a comeback unless the parties say that the old obligation should really be extinguished.

– If the new obligation is only voidable, then yes parin to novation. If it is annulled though, novation “did not happen,” and the old obligation can be enforced.

ARTICLE 1298Novation is void if the old obligation was void. EXCEPT when annulment may be claimed only by debtor or when ratification validates acts which are voidable.

– Ratification says yes to the obligation even though you'd be stupid to.

ARTICLE 1299If the old obligation had a suspensive or resolutory condition, the new obligation will also have it, unless stipulated.

– Efficacy of the new obligation depends upon whether the condition which affects the old obligation is complied with or not.

ARTICLE 1300Subrogation of a third person in the rights of the creditor is either legal or conventional.

– “Legal” is not presumed.– “Conventional” must be clearly established in order to take effect.– SUBROGATION: substitution of a creditor (subroger) for another (subrogee) in reference to

a right or lawful claim.– KINDS OF SUBROGATION

1. CONVENTIONAL: takes place by express agreement of debtor, old creditor, new creditor.2. LEGAL: takes place without agreement but by operation of law.

ARTICLE 1301Conventional subrogation requires the consent of debtor, old creditor, new creditor.

– DEBTOR because he's still the liable one.

– OLD CREDITOR: because his rights are extinguished.– NEW CREDITOR: because he may not trust the debtor. [Labo mo, de wag ka na sumali.]

ARTICLE 1302Presume legal subrogation when (1) a creditor pays another creditor who is preferred, even without debtor knowledge; (2) when a third person [without any tie to the obligation] pays with the approval of the debtor; (3) a person interested in the fulfillment of the obligation pays, even with knowledge of debtor, without prejudice to effects of confusion.

ARTICLE 1303In subrogation, all the rights and actions of the old creditor are transferred to the new creditor.

– Basically, the obligation carries on as if nothing changed.

ARTICLE 1304If partial payment has been made to a creditor, he is preferred to the subrogated creditor.

ARTICLE 1305A contact is a meeting of minds between two people whereby one binds himself to give something or to render some service.

– An offer to the fulfillment of a prestation by one party is accepted by another.– CONTRACT vs. OBLIGATION

1. Contract is a source of obligation.2. Obligation is the legal tie that exists after a contact is made.3. No contract, no obligation; but an obligation made exist without a contract.

– CONTRACT vs. AGREEMENT: Contracts are agreements enforceable through legal proceedings. Agreements that are not enforceable by that means are not contracts. All contracts are agreements but not all agreements are contracts.

ARTICLE 1306The contracting parties may establish stipulations, clauses, terms and conditions.

– LIMITS TO CONTRACTUAL STIPULATIONS1. LAW: duh.2. POLICE POWER: the power of state to enact laws.

– CONTRACT MUST NOT BE CONTRARY TO1. LAW: duh nga.2. MORALS: deal with norms of good and right conduct, but norms may differ with people.3. GOOD CUSTOMS: habits and practices of society.4. PUBLIC ORDER: keep the public safe. This part is really lame.5. PUBLIC POLICY: the common good. Oh life.

ARTICLE 1307Innominate contracts are regulated by stipulations of parties, and basta regular law.

– INNOMINATE CONTRACTS: no specific name or designation in law.a. KINDS

1. DO UT DES: I give that you may give2. DO UT FACIAS: I give that you may do3. FACTO UT DES: I do that you may give4. FACTO UT FACIAS: I do that you may do.

B. WHY DO WE NEED THEM?It is impossible to anticipate all kinds of contracts.

C. RULES GOVERNING THEMGoverned by agreement of the parties, Civil Code, rules governing analogous contracts,

customs.– NOMINATE CONTRACTS: specific name or designation in law.

ARTICLE 1308The contact must bind both parties, its validity or compliance cannot be left to the will of one of them.

ARTICLE 1309The determination of the performance is left to a third person whose decision is not binding until it is made known to both contacting parties.

– A third person can appraise the value of obligation to either party.

ARTICLE 1310The determination of performance made by a third person [in 1309] is not obligatory if it sucks.

– If it sucks forreal, the courts handle it.

ARTICLE 1311Contacts affect only the parties, the assigns, the heirs.

– EXCEPTIONS: contracts that are not transmissible by their nature [involving personal qualifications], by stipulation, by provision of law.

– Third person who did not take part in the contract but is affected by it? You have no right to demand anything.

– STIPULATION POUR AUTRUI: favour to a third person who has a right to demand fulfillment, assuming he says yez to the obligor.a. CLASSES1. Stipulation is intended for the benefit of such person.2. Obligation is due from the promisee to the third person.b. PREREQUISITES1. Clearly agreed upon favour to the third person.2. Third person must have communicated acceptance to obligor before revocation.3. Stipulation in favour of third person must only be a part of the contract.4. Should not be compensated by any kind of obligation.5. Neither contracting party represents third party.

ARTICLE 1312In contracts creating real rights, third persons who come into possession of the object of the contract are included.

– This is the exception to the rule that a contract only binds involved parties.

ARTICLE 1313Creditors are protected in cases of contracts intended to defraud them.

– In case third parties or attachments are made to the obligation. → Keeps the creditor safe from getting played like a nigger.

ARTICLE 1314Contracting party that induces a third party to violate the contract is liable for damages.

– Stranger and his unwarranted interference with a contract.– Presupposes the contract is valid and the third person has knowledge of the contract.

ARTICLE 1315Contracts are perfected by mere consent.

ARTICLE 1316Real contracts such as deposit, pledge, commodatum are not perfected until delivery of the object of the obligation.

– CLASSIFICATION OF CONTRACTS ACCORDING TO PERFECTION1. CONSENSUAL CONTRACT: perfected by mere consent.2. REAL CONTRACT: perfected by the delivery of the thing.3. SOLEMN CONTRACT: that which requires compliance with certain formalities prescribed by law. Perfected by acquiring special form.

– STAGES IN THE LIFE OF A CONTRACT1. PREPARATION/NEGOTIATION: no definite agreement yet; steps leading to perfection.2. PERFECTION/BIRTH: definite agreement over subject matter and cause of the contract and essential elements.3. CONSUMMATION/TERMINATION: parties have performed respective obligations; contract is fully accomplished, resulting to extinguishment.

– PERFECTION means they are bound to the fulfillment of contract and its consequences.

ARTICLE 1317No one may contract in the name of another without authorization or right by law to representation. Any made like dut is unenforceable unless ratified by person in whose name it was made.

– Ratification has to be before the other contracting party revokes it. Must be clear and express.

– PERSON BOUND BY THE CONTRACT OF ANOTHER? Guy who did the contract has to be authorized or he as to have right by law to represent the guy whose named he used. AND person whose name it was made in must act within his power.

– If person in whose name the contract was made is not given notice, the guy who made the contract in his name is liable.

ARTICLE 1318There is no contract unless these prerequisites are met: consent of the contracting parties; object certain which is the subject matter; cause of the obligation is established.

– CLASSES OF ELEMENTS OF A CONTRACT1. ESSENTIAL ELEMENTS: requisites of a contract. Without this, the contract does not validly exist.

a. COMMON: those present in all contracts, like consent, object, cause.b. SPECIAL: present in specific cases.

- as regards to FORM.- as regards to SUBJECT MATTER.- as regards to CONSIDERATION or cause.

2. NATURAL ELEMENTS: those presumed to exist in certain contracts in relation to the nature of the contracts themselves.3. ACCIDENTAL ELEMENTS: stipulations established by parties, like conditions, periods, interest, penalty, etc.

ARTICLE 1319Consent is the meeting of an offer and the acceptance upon the thing and the cause which are to constitute the contract. Acceptance made by letter or telegram binds the offerer only at the time when he came into the knowledge. The contract is presumed to have been entered into in the place where the offer was made.

– OFFER: proposal made by one party to another to enter into a contract. Must be certain.– ACCEPTANCE: manifestation of approval of the offeree to the offerer. Must be absolute.– QUALIFIED ACCEPTANCE: constitutes a counter offer. → Basically rejection of the

original offer, becomes an attempt by parties to enter into a contract, but on a different basis.

Must eventually be absolute.

ARTICLE 1320Acceptance may be express or implied.

– May be oral or written, or inferable by act or conduct.– OBLIGATION ON THEN unless it was a gratuitous act pala. =))

ARTICLE 1321Offerer fixes time, place, manner of acceptance.

– Basically a deadline for agreeing to a contract. [Arte mo, kainis.] Like, you must accept the offer personally at this brothel to Charity, in between her second and third customers, blah blah blah.

ARTICLE 1322An offer made through an agent is accepted once acceptance has been communicated to the guy who offered.

– Agent is an extension of the guy in question.– Applies only if the offer was made through the agent in the first place.

ARTICLE 1323An offer becomes ineffective upon death, civil interdiction, insanity, insolvency of either party before acceptance is conveyed.

ARTICLE 1324When the offerer allows a certain period for acceptance, the offer may be withdrawn anytime before acceptance, except when the option is founded upon a consideration, as something paid or promised.

– OPTION CONTRACT: allowance period for acceptance. [Di ko gets, k.]– OPTION PERIOD: period given within which the offer must be accepted.– OPTION MONEY: money paid or promised to be paid in consideration for the option. Not

earnest money. → EARNEST MONEY: partial payment of purchase price, considered proof of perfection.

ARTICLE 1325Advertisements of stuff for sale are not definite offers, but invitations to make offers. [You're so malandi naman.]

– EXCEPTION: all details necessary to make a contract are already given.

ARTICLE 1326Advertisements for bidders are invitations to make proposals. Advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears.

– In real life, the bidder is the one making an offer.– In judicial sales, however, the sheriff or auctioneer is bound to accept the highest bid.

ARTICLE 1327The following cannot give consent to a contract: unemancipated minors, the insane/demented, deaf-mutes who do not know how to write.

– The above must be at the time of contracting.

ARTICLE 1328Contracts entered into during a lucid interval are valid. Contracts agreed upon while you're drunk or

under a hypnotic spell are voidable.– LUCID INTERVAL: temporary period of sanity. Think Ellis Grey in Grey's Anatomy.

ARTICLE 1329The incapacity declared in 1327 is subject to the modifications determined by law, and is understood to be without prejudice.

– HAHAHA saving your asses. Whatta law.– EXCEPTIONS TO 1327:

1. When necessities are sold to a minor who can't pay, he must pay a reasonable price.2. Minor may contract for life, health and accident insurance. Must be for him.3. Contract is valid if entered through a guardian or legal representative.4. Contract is valid if minor is smarter than the other guy and gets him to believe in his legal capacity.5. Contact is valid if minor between 18-21 voluntarily fulfills an obligation, and obligee gives it two thumbs up.

– MORE DISQUALIFICATIONS1. People under the accessory penalty civil interdiction.2. Hospitalized lepers.3. Prodigals.4. Deaf and dumb who are can't read and write.5. Those of unsound mind [even if they have lucid intervals].6. Those who by reason of age, disease, mind, etc. cannot take care of themselves slash manage their own property.7. Insolvents unless discharged.8. Married women is certain cases.9. Husband and wife in sale of property to each other.10. Other people especially disqualified by law.

ARTICLE 1330A contract where consent is given through mistake, violence, intimidation, undue influence, fraud is voidable.

– CHARACTERISTICS OF CONSENT1. Intelligent.2. Voluntary.3. Conscious.

– VICES OF CONSENT: these make a contract voidable.1. error or mistake.2. violence or force.3. intimidation or threat.4. undue influence.5. fraud or deceit.

– Voidable, okay, not void.

ARTICLE 1331A mistake invalidates a contract only if it refers to the thing/object of the contract. Mistakes in identity or qualifications of one of the parties is okay only if the identity and qualifications are actually involved in the contract.

– MISTAKE/ERROR: false notion of a thing or a fact material to the contract.– MISTAKES THAT DO NOT VITIATE CONSENT:

1. Mistake in quality or amount.2. Error in regard to motives of the contract.3. Identity or qualifications of a party.

4. Errors as regards to the incidents of a thing.

ARTICLE 1332When one party is unable to read or if the contract is in a language not understood by him, and mistake or fraud is alleged, and the person enforcing the contract must provide proof that terms have been fully explained.

– When a people signs a document, the presumption is that he has the full knowledge of its content.

ARTICLE 1333There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.

– If a party knew beforehand the doubt, contingency, risk affecting the object of the contract, he can't claim mistake.

ARTICLE 1334Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent.

– PREREQUISITES1. Error must mutual.2. It must be as to the legal effect of an agreement.3. It must frustrate the parties.

ARTICLE 1335There is violence when in order to wrest consent, serious or irresistible force is employed. There is intimidation when one of the contracting parties is compelled by fear of an imminent/grave evil to give consent. To determine the degree of the intimidation, age, sex and condition of the person shall be remembered. A threat to enforce one's claim through competent authority does not vitiate consent.

ARTICLE 1336Violence or intimidation shall annul the obligation.

– Even if performed by a third party.

ARTICLE 1337There is undue influence when a person deprives the latter of reasonable freedom of choice.

– UNDUE INFLUENCE: influence that overpowers the mind of a party as to destroy his free will.

– CIRCUMSTANCES TO CONSIDER: confidential, family, spiritual relations between parties; mental weakness; ignorance; financial distress.

ARTICLE 1338There is fraud when, through insidious words, a party is induced to enter a contract which he would not have agreed to otherwise.

– CAUSAL FRAUD: fraud committed by one party to secure the consent of the other.– PREREQUISITES OF CAUSAL FRAUD: there must be misrepresentation or concealment;

it must be serious; it must have been employed by only one of the contracting parties; must be in bad faith; must have induced the consent of the other contracting party; proved by clear and convincing evidence.

ARTICLE 1339Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by

confidential reasons, constitutes fraud.– CONCEALMEANT, okay.

ARTICLE 1340The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent.

– Yay for advertising and comm theory and propaganda.

ARTICLE 1341A mere expression of an opinion is not fraud, unless made by an expert and the other party relied on the former's knowledge.

ARTICLE 1342Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual.

ARTICLE 1343Misrepresentation made in good faith is not fraudulent but may constitute error.

ARTICLE 1344In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties. Incidental fraud only obliges the person employing it to pay damages.

– INCIDENTAL FRAUD: only renders the party who employs it liable because the fraud was not the principal inducement that led the other to give consent.

– See 1338 for requisites of causal fraud.

ARTICLE 1345Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter when the parties conceal their true agreement.

ARTICLE 1346An absolutely simulated contract is void. A relative simulation binds the parties to their real agreement.

– SIMULATION OF A CONTRACT: act of deliberately deceiving others of the apperance of a contract.

– KINDS OF SIMULATION:1. ABSOLUTE: contract does not really exist, parties do not intend to be bound; inexistent and void.2. RELATIVE: contract entered is different from their true agreement. Cannot prejudice a third person and not intended to be contrary to law, morals, etc. the normal goody goody crap.

ARTICLE 1347All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights when not intransmissible may be the object of a contract. All services not contrary to goody goody crap may be the object of a contract. No contract may be entered into upon future inheritance except in cases expressly authorized by law.

ARTICLE 1348Impossible things or services cannot be the object of contracts.

– OBJECT OF A CONTRACT: subject matter. The object is the obligation created.

– KINDS OF OBJECT OF CONTRACT: Object certain is the second essential element of a valid contract-- may be things, rights or services.

– REQUISITES FOR OBJECTS1. Must within the commerce of man. → Can legally be the subject of a commercial transaction.2. Must not be impossible, legally or physically.3. Must be in existence or capable of coming into existence.4. Must be determinate or determinable without the need of a new contract between the parties.

– FUTURE INHERITANCE: any property or right, not in existence or capable of determination at the time of contract, that a person may eventually inherit.

– KINDS OF IMPOSSIBILITY1. PHYSICAL: when the thing or service cannot exist or be performed.

a. ABSOLUTE: when the act cannot be done in any case so that nobody can perform it.b. RELATIVE: when it arises from special circumstances of the case.

2. LEGAL: when object is contrary to goody goody crap.

ARTICLE 1349The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract.

ARTICLE 1350In onerous contracts the cause is understood to be the promise of a thing or service to each other. In remuneratory ones, the service or benefit which is renumerated [paid for]. In contracts of pure beneficence, the mere liability of the benefactor.

– CAUSE: purpose of the contracting parties for entering the contract.– CAUSE vs. OBJECT: act in order to get object.– CLASSIFICATIONS OF CONTRACT ACCORDING TO CAUSE

1. ONEROUS: promise of a thing or service; parties are reciprocally obligated.2. RUNUMERATORY: reward the thing or service rendered.3. GRATUITOUS: basta the benefactor just gave it.

ARTICLE 1351The motives of a party for entering a contract are not the same as the cause.

– MOTIVE: personal reason a party has for entering a contract.– CAUSE vs. MOTIVE:

1. Cause is the immediate, direct reason; motive is remote, indirect.2. Cause is known to the other contracting party; motive is not.3. Cause is an essential element of a contract; motive is not.4. An illegal cause affects contract validity; an illegal motive does not.

ARTICLE 1352Contracts without cause or with unlawful cause produce no effect. Cause is unlawful when contrary to goody goody crap.

ARTICLE 1353The statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful.

– REQUISITES OF A CAUSE: must exist when contract is entered into; must be lawful; must be true and real.

– ABSENCE/WANT OF CAUSE: no valid consideration for the contract.

– INADEQUACY OF CAUSE: what do YOU think? :|– FAILURE OF CAUSE: doesn't mean contract is void.– ILLEGALITY OF CAUSE: there is a cause but it's illegal.– FALSITY OF CAUSE: contract may state a valid consideration but iz nat true.

ARTICLE 1354Although the cause is not stated in the contract, presume it exists and is lawful, unless debtor says otherwise.

– Assume a person will not part with property unless there is reason to.

ARTICLE 1355Lesion or inadequacy of cause does not invalidate a contract, unless there is fraud, mistake, undue influence.

– LESION: damage caused by the fact that the price is unjust or inadequate.– EXCEPTIONS: fraud, mistake, undue influence.

ARTICLE 1356Contracts shall be obligatory, should all essential requisites for validity be present. But if the law requires that a contract be in some form in order to be valid/enforceable, it has to happen. In such cases, the right of the parties cannot be exercised.

– FORM OF A CONTRACT: refers to the manner which a contract is executed.– CLASSIFICATIONS OF CONTRACTS:

1. INFORMAL: any form, as long as all essentials are there.2. FORMAL: required by law to be in a specific form.

– THE FORM IS REQUIRED IN THE FOLLOWING CASES1. Law requires contract to be valid.2. Law requires to be enforceable/proved.3. Law requires contract to be in some form for convenience of parties or third parties.

ARTICLE 1357If the law requires a document or special form, the contracting parties may compel each other to observe that form upon contract perfection.

ARTICLE 1358The following must appear in a public document:

(1) acts and contract which have for their object, the creation, transmission, modification or extinguishment of real rights over immovable property;

(2) the cession, repudiation, renunciation of hereditary rights or conjugal gain;(3) power to administer property or any other power for its object;(4) the cession of actions or right proceeding from an act appearing in a public document.– CESSION: formal giving up of rights.

ARTICLE 1359A party can ask for reformation of an instrument if true intention was not expressed or by reason of mistake, fraud, inequitable conduct, accident.

– REFORMATION: remedy where a written instrument is amended or rectified so as to express to the real agreement or intention of the parties.

– REQUISITES OF REFORMATION:1. meeting of the minds of parties.2. written instrument does not express the true agreement or intention of the parties.3. failure to express the true intention is due to mistake, fraud, inequitable conduct, accident.

4. facts upon which relief by way of reformation is sought.5. clear and convincing evidence of mistake, fraud, inequitable conduct, accident.

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

ARTICLE 1361When a mutual mistake of parties causes failure of instrument, REFORMATION ON.

– MUTUAL MISTAKE1. Mistake must be of fact.2. Must be proved by clear and convincing evidence.3. Must be mutual.4. Must cause failure of instrument.

ARTICLE 1362Mistake by one party and fraud, inequitable conduct on the other? Mistaken party can ask for reformation.

ARTICLE 1363Concealment of mistake in instrument by one party? The other can ask for reformation.

ARTICLE 1364If the person drafting the instrument sucks, the courts can order reformation.

ARTICLE 1365If two parties agree upon property, the instrument states that the property is sold absolutely or with a right to repurchase, reformation of the instrument is proper.

ARTICLE 1366No reformation when:

(1) simple donations when no condition is imposed.(2) Wills.(3) When real agreement is void.

ARTICLE 1367When a party asks to enforce the instrument, he can't ask na for reformation.

ARTICLE 1368Heirs may ask for reformation.

ARTICLE 1369Procedure for reformation shall be governed by the Supreme Court.

ARTICLE 1370If the terms of a contract are clear and leave no doubt, use the literal meaning of its stipulations. If the words are contrary to the intention of the parties, intention of the parties for the win nalang.

– INTERPRETATION OF A CONTRACT: determination of the meaning of the terms or words used by parties in a contract.

ARTICLE 1371In order to judge the intention of the contracting parties, their present and future acts are the principal considerations.

ARTICLE 1372Even though a contract's terms are general, they shall not be seen as different than what the parties intended.

ARTICLE 1373If some stipulation of any contract should admit of several meanings, go with the meaning where the contract can be carried out.

ARTICLE 1374Various stipulations of a contract must be interpreted altogether.

ARTICLE 1375Keep all words within the context of the contract.

ARTICLE 1376The usage or custom of the place shall be borne in mind in the interpretation of contract ambiguities.

ARTICLE 1377The interpretation of obscure words/stipulations shall not favour the party who caused the obscurity.

ARTICLE 1378Impossible to settle doubts? Least transmission of rights and interest shall prevail. Onerous contract? Settle in favour of the greatest reciprocity of interests. Doubts still and parties' intention is unclear? Contract is null and void.

ARTICLE 1379Principles of interpretation should also be observed in the construction of contract.

ARTICLE 1380Contracts validly agreed upon may be rescinded in the cases established by law.

– RESCISSIBLE CONTRACTS: validly agreed upon because all essential elements exist but its enforcement would cause injustice.

– RESCISSION: remedy granted by law to the contracting parties in order to make amends for damages caused by a valid contract.

– REQUISITES OF RESCISSION:1. Contract must be valid.2. There must be lesion or pecuniary prejudice to one of the parties or a third party.3. Rescission must be based on a case provided by law.4. There must be no other legal remedy to obtain reparation for damages.5. Party asking to rescission must be able to return what he is obliged to restore.6. Object of the contract must not be in the possession of a third party.7. the period for filing rescission action must not have prescribed.

ARTICLE 1381The following contracts are recissible:

(1) those entered by guardians whose wards suffer lesion by more than ¼ of the value of the object.

(2) Same as above, but by representatives.(3) Those undertaken in fraud of creditors when the latter cannot collect claims due to them.(4) Those with objects under litigation.

(5) All other contracts declared by law to be subject to rescission.

ARTICLE 1382Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected are also rescissible.

– “Insolvency” can just be incapability to fulfill obligation.

ARTICLE 1383Rescission happens only when there are no other means for reparation.

ARTICLE 1384Rescission shall only be to the extent of covering the damages caused.

ARTICLE 1385Rescission creates the obligation to return things. Can't be in someone else's possession.

ARTICLE 1386Rescission shall not take place with contracts approved by the courts.

ARTICLE 1387All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into by fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation.

– Basically, how can you afford to give someone shit when you haven't even paid off your debts?

ARTICLE 1388Whoever acquires in bad faith the things alienated in fraud of creditors shall indemnify the latter for damages if it's impossible to return them.

ARTICLE 1389The action to claim rescission must happen within four years. For those under guardianship or whatever, those four years begin once you take control.

ARTICLE 1390The following contracts are voidable to annullable even though there may have been no damage to the contracting parties:

(1) when a party is capable of giving consent to a contract.(2) When consent is vitated by mistake, violence, intimidation, undue influence, fraud.– VOIDABLE: those which possess all the essentials of a valid contract but yun nga, look

up. :)) They are valid and binding unless annulled. Once ratified, they become absolutely valid and can never be annulled na.

– KINDS OF VOIDABLE CONTRACTS: Voidable when... LOOK UP NGA. =)) KAINIS. =))

– ANULMENT: remedy provided by law for the declaration of the inefficacy of a contract.

ARTICLE 1391Period of action for annulment is four years. From the time: guardianship ceases; discovery of mistake or fraud; defect of the consent due to intimidation, violence, undue influence ceases.

ARTICLE 1392Ratification extinguishes the action to annul a voidable contract.

– RATIFICATION: you voluntarily say yes to defective crap in the contract which would not have been binding until you decided to do diz. It “cleans” the contract, and you can't annul it anymore.

ARTICLE 1393Ratification may be expressed expressly or tacitly. It is understood that there is a tacit ratification if the person who has the right to invoke it acts in implication to waive his right.

– KINDS OF RATIFICATION1. EXPRESS – oral or written.2. IMPLIED/TACIT – may take diverse forms, like silence, or acts showing approval of the contract, etc.

– REQUISITES OF RATIFICATION1. Must be knowledge of the reason which renders the contract voidable.2. Such reason must have ceased.3. Injured party must have executed an act which necessarily implies an intention to waive his right.

ARTICLE 1394Ratification may be effected by a guardian.

ARTICLE 1395Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment.

ARTICLE 1396Ratification cleanses the contract from all its defects.

ARTICLE 1397The action for the annulment can be brought in by strangers, but not the bad people who did intimidation, etc.

ARTICLE 1398An obligation having been annulled, the contracting parties shall restore to each other the objects of the obligation. In obligations to render service, the value is the basis for damages.

ARTICLE 1399When the defect in the contract is due to incapacity of a party, he only has to give back to the extent that he has benefitted.

– Exception to 1398.

ARTICLE 1400If you have to return the object and you can't cause you lost it, you have to return the value of the thing + fruits of it, with interest from the same date.

ARTICLE 1401The action for annulment is extinguished when the object to be returned is lost through fraud or fault of the person who has a right to institute the proceedings.

– Right of action is based on the incapacity of any of the contracting parties.

ARTICLE 1402If you can't restore what you have to return, there is no annulment.

– Even due to fortuitous events.

ARTICLE 1403The following contracts are unenforceable unless ratified:

(1) those entered in the name of another without authorization to.(2) Noncompliance with the State of frauds. The following can be done upon authorization in

writing: an agreement that can't be performed within a year of making it; special promise to answer for the debt, default, miscarriage of another; agreement made in consideration of marriage other than a mutual promise to marry; agreement for the sale of goods for less than PhP500; a leasing agreement longer than a year; representation to the credit of a third person.

(3) Those where both parties can't give consent.– UNENFORCEABLE CONTRACTS: cannot be enforced by law due to contract defects

until cured or ratified.– KINDS OF UNENFORCEABLE CONTRACTS: see above.– UNAUTHORIZED CONTRACTS: those entered in the name of another without

authorization to.

ARTICLE 1404Unauthorized contracts are governed by 1317.

ARTICLE 1405Contracts infringing the State of Frauds are ratified by the failure to object and by the acceptance of benefits in the contract.

ARTICLE 1406When a contract is enforceable under the Statute of Frauds and a public document is necessary for its registration in the Registry of Deeds, the parties may avail themselves of the right under article 1357.

ARTICLE 1407If both parties cannot give consent, authorize someone to. If ratification is made by the authorized for both parties, contract is valid from inception.

– One party lang? Voidable.

ARTICLE 1408Unenforceable contracts cannot be assailed by a third person.

ARTICLE 1409The following contracts are inexistent and void from the beginning:

(1) those against the goody goody crap.(2) Those which absolutely simulated.(3) Those with a cause or object that did not exist at the time of transaction.(4) Those whose object is outside the commerce of men.(5) Those which contemplate an impossible service.(6) Those where the intention of the parties relative to the object is not clear.(7) Those expressly prohibited or declared void by law.– VOID CONTRACTS: generally produce no effects whatsoever.– INEXISTENT CONTRACTS: agreements that lack elements or do not comply with

formalities essential in a contract.– CHARACTERISTICS OF VOID/INEXISTENT CONTRACTS:

1. No effects.2. Can't be ratified.3. Right to set up defense of illegality can't be waived.

4. Action or defense for the declaration of its inexistence does not prescribe.5. The defense of illegality is not available to third persons whose interests are not directly affected.6. Can't give rise to a valid contract.

ARTICLE 1410Action or defense for the declaration of its inexistence does not prescribe.

– Secure its voidness judicially.

ARTICLE 1411When the contract is null because the cause or object is illegal, and the act constitutes a criminal offense, there will no be no action against teach other. They will instead be prosecuted.

– Rule is applicable when one party is guilty. The innocent one can just return his crap.

ARTICLE 1412If the act above doesn't constitute a criminal offense:

(1) If both parties are at fault, neither can recover what he was given by virtue of the contract or demand the performance of the other's undertaking.

(2) If one party is at fault, he cannot recover what he was given or ask for fulfillment of what has been promised to him. The other may demand the return of what he gave without any obligation to comply on his end.

ARTICLE 1413Interest paid in excess of interest allowed by the usury laws may be recovered by the debtor, with interest thereon from the date of payment.

ARTICLE 1414When money is paid or property delivered for an illegal purpose, the contract may be rejected by one of the parties before it has been completed.

ARTICLE 1415If one party in an illegal contract can't give consent, he can recover his crap.

ARTICLE 1416If the agreement is prohibited but not illegal, parties may recover what was paid or delivered.

ARTICLE 1417If an object has a set price, any amount paid over that price is recoverable.

ARTICLE 1418A laborer can demand compensation for service rendered beyond time limit.

ARTICLE 1419If a laborer accepts a wage lower than minimum, he can recover the difference.

ARTICLE 1420In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced.

– If indivisible and illegal, the whole contract is void and unenforceable.– The legal parts are still enforceable.

ARTICLE 1421

The defense of illegality if contracts is not available to third persons whose interests are not directly affected.

– Voidable and unenforceable? Third person can't make epal.– Void and illegal? Third person can make epal if his interest is directly affected.

ARTICLE 1422A contract which is the direct result of a previous illegal contract is also void and inexistent.