University of the Philippines College of Law

OUTLINE IN OBLIGATIONS AND CONTRACTS

Prof. Eduardo A. Labitag
Title I. Obligations Chapter I General Provisions I. Concept A. Definition- Art. 1156 - criticism of definition B. Elements 1. 2. 3. 4. Active Subject Passive Subject Prestation or Object Efficient cause or juridical tie or vinculum juris

C. Distinction Between Natural and Civil Obligations 1. As to enforceability 2. As to basis II. Sources of Obligations- Art. 1157 A. Law- Art. 1158 B. Contracts- Art. 1159, 1305 C. Quasi-Contracts- Art.1160, 2142 1. Kinds a. Negotiorum gestio- Art.2144 b. Solutio indebiti- Art. 2154 c. Other quasi-contracts- Arts. 2164 to 2175 D. Acts or omissions punished by law- Art. 1161 E. Quasi-Delicts- Art.1162, 2176

1. Distinction between quasi-delicts and crimes 2. Liability for fault of others- Art. 2180; Art. 218, 219 of FC 3. Civil liability arising from crime- Art. 1161; Rules on Criminal Procedure (2000), Rule 111 Cases Barredo v. Garcia, 73 Phil. 607 (1942) Mendoza v. Arrieta, 91 SCRA 113 (1975) PSBA v. CA, 205 SCRA 729 (1992) Amadora v. CA 160 SCRA 315 (1988) Air France vs. Carrascoso 18 SCRA 155 (1966) III. Classification of Obligations A. Primary Classification Under the Civil Code 1. Pure and Conditional (Arts. 1179-1192) 2. With a period or term (Arts. 1193-1198) 3. Alternative and Facultative (Arts. 1199-1206) 4. Joint and Solidary (Arts. 1207-1222) 5. Divisible and Indivisible (Arts. 1223-1225) 6. With a penal clause (Arts. 1226-1230) B. Secondary Classification 1. Legal (Art. 1158); Conventional (Art. 1159); Penal (Art. 1161) 2. 3. 4. 5. 6. 7. 8. Real (to give) and Personal (to do or not to do) Determinate and Generic (as to subject matter of obligation) Positive (to give, to do) and Negative (not to give, not to do) Unilateral and Bilateral Individual and Collective Accessory and Principal As to object or prestation: Simple Multiple Conjunctive Distributive Alternative Facultative 9. Possible and Impossible

Chapter 2. Nature and Effects of Obligations I. Kinds of Prestation A. Obligation to give 1. a specific thing a. Duties of the obligor i. To deliver thing itself- Art. 1244 ii. To preserve thing- Art. 1163 iii. To deliver the accessions and accessories- Art. 1166 - distinction between accession and accessory iv. To deliver the fruits- Art.1164 par. 1 2. a generic thing- Art. 1246 B. Obligation to do- Art.1244 C. Obligation not to do- Art. 1244 II. Breach of Obligation A. Concept 1. Distinction between substantial and casual/slight breach Cases: Song Fo v. Hawaiian Phils. 47 Phil 821 (1928) Velarde, et al v. CA 361 SCRA 56 (2001) Angeles, et al. vs. Ursula Calasanz, et al., G.R. No. L42283, March 18, 1985 Delta Motor Corp. vs. Genuino & CA, G.R. No. 55665, February 8, 1989 Vermen Realty vs. CA, GR 101762, July 6, 1993, 224 SCRA B. Modes of Breach- Art.1170 1. Fraud (dolo) a. Concept i. dolo (1171) vs. dolo incidente ii. dolo (1171) vs. dolo causante Case

Woodhouse v. Halili, 93 Phil. 526 (1953) Lydia L. Geraldez, vs. CA & Kenstar Travel Corporation, G.R. No. 108253, February 23, 1994. b. Nonwaiver- Art. 1171 c. Effects 2. Negligence- Art. 1172 a. Concept- Art. 1173 i. culpa v. dolo ii. culpa aquiliana v. culpa contractual Cases Gutierrez v. Gutierrez, 56 Phil. 177 (1932) Vasquez v. Borja, 74 Phil. 560 (1944) b. Standard of care required- Art. 1173 par. 2 Cases De Guia v. Manila Electric Co., 40 Phil. 706 (1920) US v. Barias, 23 Phil. 434 (1912) Sarmiento v. Sps. Cabrido, 401 SCRA 122 (2003) Crisostomo v. CA, 409 SCRA 528 (2003) c. Effects 3. Delay (Mora)- Art. 1169 a. Concept b. Kinds i. mora solvendi - requisites - General Rule: Creditor should make demand before debtor incurs delay- Art. 1169 Case Cetus Development Corp. v. CA , SCRA 72 (1989) Aerospace Chemical Industries vs. CA, GR No. 108129, September 23,1999, 315 SCRA Santos Ventura Hocorma Foundation vs. Santos, GR 153064, November 4, 2004 441 SCRA

Dr. Daniel Vazquez & Ma. Luisa M. Vazquez, vs. Ayala Corporation, G.R. No. 149734, November 19, 2004. Exceptions:- Art. 1169 Case Abella v. Francisco, 55 Phil. 447 (1931) Eusebio De La Cruz vs. Apolonio Legaspi & Concordia Samperoy, G.R. No. L-8024. November 29, 1955. ii. mora accipiendi - requisites - see also 1268 Case Vda. De Villaruel v. Manila Motor Co., Inc., 104 Phil. 926 (1958) iii. compensatio morae - requisites Case Central Bank v. CA, 139 SCRA 46 (1985) c. Effects 4. Contravention of the tenor Cases Chavez v. Gonzales, 32 SCRA 547 (1970) Telefast v. Castro, 158 SCRA 445 (1988) Arrieta v. NARIC, 10 SCRA 79 (1964) Victoriano Magat vs. Medialdea (206 Phil 341) III. Remedies Of Creditor in Case of Breach A. Action for performance 1. Action for specific performance in obligation to give a specific thing- Art. 1165 par.1; ROC 39 Sec. 10 2. Action for substituted performance in obligation to give a generic thing- Art.1165 par. 2

3. Action for substituted performance or undoing of poor work in obligation to do - Art. 1167 Cases: Chavez v. Gonzales, supra Tanguilig v. CA, 266 SCRA 78 (1997) a. Exception 4. Action for undoing in obligation not to do- Art. 1168 a. Exception B. Action for damages- Art.1170 C. Action for rescission- Art. 1191, 1192 IV. Subsidiary Remedies of Creditor A. Accion Subrogatoria- Art.1177 1. Concept 2. Requisites 3. Exceptions- inherent rights of debtor; Art. 772 B. Accion Pauliana- Art. 1177, 1381 par. 3 1. Concept a. Distinction between accion pauliana and accion subrogatoria 2. Requisites Case Khe Hong Cheng v. CA, 355 SCRA 701 (2001) Maria Antonia Siguan vs. Rosa Lim, Linde Lim, Ingrid Lim and Neil Lim, G.R. No. 134685, November 19, 1999. C. Other Specific Remedies- Art. 1652, 1729, 1608, 1893 V. Extinguishment of Liability in Case of Breach Due to Fortuitous Event- Art. 1174 A. Concept of Fortuitous Event 1. Act of God 2. Act of Man

B. Requisites 1. Effect of concurrent fault Cases Juan Nakpil & Sons v. CA, 144 SCRA 597 (1986) Republic v. Luzon Stevedoring Co., 21 SCRA 279 (1967) Dioquino v. Laureano, 33 SCRA 65 (1970) Austria v. CA, 39 SCRA 527 (1971) NPC v. CA, G.R. No. L-47379, 161 SCRA 334 (1988) Yobido v. CA, 281 SCRA 1 (1997) Bacolod-Marcia Milling vs. CA and Gatuslao, GR. No. 8110001, Feb. 7, 1990, 182 SCRA Philcomsat vs. Globe Telecom, GR No. 147324, May 25, 2004, 430 SCRA C. Extinguishment of Liability; Exceptions- Art. 1174, 1165 par. 3, 552, 1942, 1979, 2001, 2147 VI. Usurious Transactions- Art. 1175, 1413, 1961 A. PD 858; PD 1685 B. Central Bank Circular 416 C. Monetary Board Circular # 905 lifting the interest rate ceiling- (vs. 2209) Cases Eastern Shipping Lines v. CA, 234 SCRA 781 (1994) Crismina Garments v. CA, 304 SCRA 356 (1999) Keng Hua Products v. CA, 286 SCRA 257 (1998) Security Bank v. RTC Makati, 263 SCRA 453 (1996) Almeda v. CA, 256 SCRA 292 (1996) Angel Warehousing vs. Cheldea 23 SCRA 19 (1968) First Metro Investment vs. Este. Del Sol (Nov. 15, 2001, 369 SCRA) VII. Fulfillment of Obligations A. see Chapter 4: Payment B. Presumptions in payment of interests and installments- Art. 1176 VIII. Transmissibility of Rights- Art. 1178 Chapter 3. Different Kinds of Obligations

I. Pure and Conditional Obligations A. Pure Obligations- Art. 1179 par. 1 B. Conditional Obligations- Art. 1181 1. Condition a. Concept b. Condition v. Period/Term Cases Gaite v. Fonacier, 2 SCRA 830 (1961) Gonzales v. Heirs of Thomas, 314 SCRA 585 (1999) 2. Kinds of Conditions a. As to effect on obligation- Art. 1181 Gonzales v. Heirs of Thomas, 314 SCRA 585 (1999) i. Suspensive (condition precedent) - retroactive effect when condition is fulfilledArt. 1187 Romulo A. Coronel, et. al., vs. CA and Concepcion D. Alcaraz , G.R. No. 103577, October 7, 1996. - rights of creditor and debtor before fulfillment of condition- Art. 1188 ii. Resolutory (condition subsequent) Cases Parks v. Province of Tarlac, 49 Phil. 142 (1927) Central Philippine University v. CA, 246 SCRA 511 (1995) Alfonso Quijada, et al., vs. CA, G.R. No. 126444, December 4, 1998. b. As to cause or origin- Art. 1182 i. Potestative - effect if fulfillment of condition depends solely on the will of the debtor (Cf. term) - debtors promise to pay when he can is not a conditional obligation- Art. 1180

Francisco Lao Lim vs. CA, G.R. No. 87047, October 31, 1990. ii. Casual Naga Telephone Co., Inc. (NATELCO) vs. CA, G.R. No. 107112, February 24, 1994. iii. Mixed Cases Osmea v. Rama, 14 Phil. 99 (1909) Hermosa v. Longora, 93 Phil. 971 (1953) Taylor v. Uy Tieng Piao, 43 Phil. 873 (1922) Smith Bell v. Sotelo Matti, 44 Phil. 875 (1922) Rustan Pulp and Paper Mills v. IAC, 214 SCRA 665 (1992) Virgilio Romero vs. CA, GR No. 107207, November 23, 1995, 250 SCRA c. As to possibility- Art. 1183 i. Possible ii. Impossible - effect Case Roman Catholic Arch of Manila v. CA, 198 SCRA 300 (1991) d. As to mode i. Positive- Art. 1184 ii. Negative- Art. 1185 3. Rules in case of loss, deterioration or improvement pending the happening of the condition- Art. 1189, 1190 Heirs of Timoteo Moreno vs. Mactan Cebu International Airport Authority, G.R. No. 156273, October 15, 2003. a. Meaning of loss (Art. 1189[2]), deterioration and improvement b. Effect of loss or deterioration i. without debtors fault

ii. with debtors fault c. Effect of improvement i. by nature or time ii. at the debtors expense 4. Effect of prevention of the fulfillment of the condition by the obligor- Art. 1186 Case Taylor v. Uy Tieng Piao, supra Jose V. Herrera vs. Leviste, G.R. No. 55744, February 28, 1985. II. Reciprocal Obligations- Art. 1191, 1192 1. Concept 2. Alternative remedies of injured party in case of breach a. Action for Fulfillment i. when fulfillment no longer possible; effect b. Action for Rescission i. requisites ii. how made iii. effects Cases Song Fo v. Hawaiian-Philippines, 47 Phil. 821 (1925) Boysaw v. Interphil Promotions, 148 SCRA 365 (1987) U.P. v. De Los Angeles, 35 SCRA 365 (1970) De Erquiaga v. CA, 178 SCRA 1 (1989) Angeles v. Calasanz, 135 SCRA 323 (1985) James G. Ong v. CA, 310 SCRA 1 (1999) Iringan v. CA, 366 SCRA 41 (2001) Visayan Saw Mill vs. CA and RJ Trading, GR. 83851, March 3, 1993, 219 SCRA Ernesto Deiparine vs. CA and Trinidad, GR. 96643, April 23, 1993 Grace Park Engineering Co., Inc. vs. Mohamad Ali Dimaporo, G.R. No. L-27482. September 10, 1981.

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Felipe C. Roque vs. Nicanor Lapuz, G.R. No. L32811, March 31, 1980. Margarita Suria vs. IAC, G.R. No. 73893, June 30, 1987. See also Art. 1786, 1788; Arts. 1484-86; RA 6552 II. Obligation With a Period- Art.1193, 1180 A. Period or Term 1. Concept 2. Period/Term vs. Condition B. Kinds of Period/Term 1. As to effect a. Suspensive (Ex die)- Art. 1193 par. 1 b. Resolutory (In diem)- Art. 1193 par. 2 2. As to expression a. Express b. Implied 3. As to definiteness a. Definite b. Indefinite 4. As to source a. Voluntary b. Legal c. Judicial C. Rules in case of loss, deterioration or improvement before arrival of periodArt. 1194, 1189 D. Effect of payment in advance- Art. 1195 Note: Art.1197 par. 3 E. Benefit of Period 1. For whose benefit a. creditor b. debtor c. both 2. Effects

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3. Presumption- Art. 1196 Cases Lachica v. Araneta, 47 OG No. 11, 5699, August 4, 1949 Ponce de Leon v. Syjuco, 90 Phil. 311 (1951) Buce v. CA, 332 SCRA 151 (2000) 4. When debtor loses right to make use of period- Art.1198 F. When Court May Fix Period- Art. 1197 1. Period is implied 2. Period depends solely on will of debtor (Cf. condition) Cases Araneta v. Philippine Sugar Estate Development Co., 20 SCRA 330 (1967) Central Philippine University v. CA, supra Florencio Deudor vs. JM Tuason, GR 13768, May 30, 1961, 1 SCRA III. Alternative Obligations A. Concept- Art.1199 B. Right of choice- Art. 1200 C. Effect of notice of choice D. When notice produces effect- Art. 1201 E. Effect of loss or impossibility of one or all prestations- Art. 1202 to 1205 F. Facultative Obligation- Art. 1206 1. Concept 2. Distinguished from Alternative Obligation 3. Effect of Substitution IV. Joint and Solidary Obligations A. Joint Obligations 1. Concept

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a. Requisites b. Words used to indicate joint obligations 2. Presumption- Art. 1207, 1208 3. Effects- Art. 1207, 1208 a. Extent of liability of debtor b. Extent of right of creditor c. In case of novation, compensation, confusion (Art. 1277), remission B. Solidary Obligations 1. Concept a. Requisites b. Words used to indicate solidary obligations 2. Kinds a. As to source- Art. 1208 i. Legal- Art. 1915, 1945, 2194; Art. 119 of RPC ii. Conventional iii. Real b. As to parties bound i. Active ii. Passive iii. Mixed c. As to uniformity i. Uniform ii. Varied/Non-uniform- Art. 1211 - effects Case Ynchausti v. Yulo, 34 Phil. 978 (1916) Baldomero Inciong vs. CA et al, GR 96405, June 26, 1996, 257 SCRA RCBC vs. CA, GR 85396, Oct 1989, 178 SCRA Lafarge Cement Phil vs. Continental Cement, GR 155173, November 23, 2004, 443 SCRA 3. Effects

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a. Solidary creditor in relation to: i. common debtor - right to demand- Art. 1215, 1214, 1216, 1217 par. 1 - in case of novation, compensation, confusion, remission by a creditor- Art. 1215 par. 1 ii. solidary co-creditor/s - in case of novation, compensation, confusion, remission- Art. 1215 par. 2 - prejudicial acts prohibited- Art. 1212 - assignment of rights not allowed- Art. 1213 b. Solidary debtor in relation to: i. common creditor - obligation to perform- Art. 1207 - in case of novation, compensation, confusion, remission by a creditor- Art. 1215 par. 1 ii. solidary co-debtor - in case of payment by a co-debtor- Art. 1217, 1218, 1220, 1219 - in case of fortuitous event- Art. 1221 Cases Jaucian v. Querol, 38 Phil. 718 (1918) RFC v. CA, O.G. No. 6, p. 2467 Quiombing v. CA, 189 SCRA 325 (1990) Inciong v. CA, 257 SCRA 578 (1996) 4. Defenses available to a solidary debtor against the creditor- Art. 1222 a. Types i. those derived from the nature of the obligation ii. personal defenses iii. defenses pertaining to his share iv. those personally belonging to the other co-debtors b. Effects Cases Ynchausti v. Yulo, supra Alipio v. CA, 341 SCRA 441 (2000) 14

C. Joint Indivisible Obligations 1. Concept i. Distinguished from Joint Obligations ii. Distinguished from Solidary Obligations 2. Indivisibility distinguished from solidarity- Art. 1210 3. Effects- Art. 1209 a. Liability for damages in case of breach- Art. 1224 V. Divisible and Indivisible Obligations A. Divisible Obligations 1. Concept 2. Effects- Art. 1223, 1233 B. Indivisible Obligations 1. Concept a. Distinguished from solidary obligations 2. Kinds a. Natural- Art. 1225 par. 1 b. Legal- Art. 1225 par. 3 c. Conventional- Art. 1225 par. 3 3. Presumptions a. Of indivisibility- Art. 1225 par. 1 b. Of divisibility- Art. 1225 par. 2 4. Divisibility and indivisibility in obligations not to do- Art. 1225 par. 3 5. Effects- Art. 1223, 1233, 1224 - see Joint Indivisible Obligations 6. Cessation of indivisibility VI. Obligations with a Penal Clause

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A. Concept 1. 2. 3. 4. 5. Principal vs. Accessory Obligation Distinguished from Conditional Obligations Distinguished from Alternative Obligations Distinguished from Facultative Obligations Distinguished from Guaranty

B. Kinds of Penal Clause 1. As to effect a. Subsidiary b. Complementary 2. As to source a. Conventional b. Legal 3. As to purpose a. Punitive b. Reparatory C. Demandability of Penalty- Art. 1226 par. 2 D. Effects of Penal Clause 1. Substitute for indemnity for damages and payment of interest- Art. 1226 a. Exception- Art. 1226 Cases Makati Development Corp. v. Empire Insurance Co., 20 SCRA 557 (1967) Antonio Tan v. CA, 367 SCRA 571 (2001) Country Bankers Insurance vs. CA, GR. 85161, Sept 9, 1991, 201 SCRA 2. Not exempt debtor from performance- Art. 1227 a. Exception- Art. 1227 3. Creditor cannot demand both performance and penalty at the same timeArt. 1227 a. Exceptions- Art. 1227 4. Creditor cannot collect other damages in addition to penalty- Art. 1226 a. Exceptions- Art. 1226

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E. When penalty shall be equitably reduced- Art. 1229 F. Nullity of Principal Obligation or Penal Clause 1. Effects- Art. 1230 2. Rationale Chapter 4. Extinguishment of Obligations I. Modes of Extinguishment- Art. 1231 A. B. C. D. E. F. G. Payment or Performance Loss or Impossibility Condonation or Remission Confusion or Merger Compensation Novation Other Causes

II. Payment or Performance A. Concept- Art. 1232 B. Requisites 1. Who can pay a. in general b. third person who is an interested party i. meaning of interested party ii. effects- Art. 1302[3] c. third person who is not an interested party but with consent of debtor i. effects- Art. 1302[2], 1236 par. 1 d. third person who is not an interested party and without knowledge or against the will of the debtor i. effects- Art. 1236 par. 2, 1237, 1236 par.1 e. third person who does not intend to be reimbursed- Art. 1238 f. in obligation to give- Art. 1239, 1427 i. effect of incapacity

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g. in case of active solidarity- Art. 1214 2. To whom payment may be made a. in general- Art. 1240 b. incapacitated person- Art. 1241 par. 1 i. requisites c. third person- Art. 1241 par. 2 i. requisites ii. when proof of benefit not required- Art. 1241 par. 3, 1242 d. in case of active solidarity- Art. 1214 3. What is to be paid (Identity) a. in general b. in obligations to: i. give a specific thing- Art. 1244 ii. give a generic thing- Art. 1246 iii. pay money- Art. 1249, 1250; R.A. 529, R.A. 4100 Cases Arrieta v. NARIC, supra Kalalo v. Luz, 34 SCRA 377 (1970) St. Paul Fire and Marine Insurance v. Macondray, 70 SCRA 122 (1976) Papa v. A.V. Valencia, et.al, 284 SCRA 643 (1998) PAL vs. CA 181 SCRA 557 (1990) c. payment of interest- Art. 1956 4. How is payment to be made (Integrity) a. in general- Art. 1233 General Rule: Partial payment is not allowed- Art. 1248 Exceptions:- Art. 1248 b. substantial performance in good faith- Art. 1234

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c. estoppel- Art. 1235 d. presumptions in payment of interests and installments- Art. 1176 5. When payment is to be made a. in general- Art. 1169 b. see Chapter 2: Delay 6. Where payment is to made- Art. 1251 par. 1 a. if no place is expressly designated- Art. 1251 par. 2 to par. 4 7. Expenses of making payment- Art. 1247 C. Application of Payments 1. Concept- Art. 1252 Cases Reparations Commission v. Universal Deep Sea Fishing, 83 SCRA 764 (1978) Paculdo v. Regalado, 345 SCRA 134 (2000) 2. Requisites 3. Rules in application of payments- Art. 1252, 1253 a. if rules inapplicable and application cannot be inferred- Art. 1254 i. meaning of most onerous to debtor D. Payment by Cession 1. Concept- Art. 1255 2. Requisites 3. Effects E. Dation in Payment 1. Concept- Art. 1245 a. distinguished from Payment by Cession Development Bank of the Philippines vs. Court Of Appeals, G.R. No. 118342, January 5, 1998.

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2. Requisites 3. Effects Case Filinvest Credit Corporation vs. Philippine Acetylene, GR L50449, Jan 1982, 111 SCRA F. Tender of Payment and Consignation 1. Tender of Payment a. Concept b. Requisites 2. Consignation a. Concept i. purpose b. Requisites i. when tender and refusal not required- Art. 1256 par. 2 ii. two notice requirement- Art. 1257 par. 1, 1258 par. 2 - effects of noncompliance c. Effects- Art. 1260 par. 1 d. Withdrawal by debtor before acceptance by creditor or approval by court; effects- Art.1260 par. 2 e. Withdrawal by debtor after proper consignation- Art. 1261 i. with creditors approval; effects ii. without creditors approval; effects f. Expenses of consignation- Art.1259 Cases De Guzman v. CA, 137 SCRA 730 (1985) TLG International Continental Enterprising, Inc. v. Flores, 47 SCRA 437 (1972) McLaughlin v. CA, 144 SCRA 693 (1986) Soco v. Militante, 123 SCRA 160 (1983) Sotto v. Mijares, 28 SCRA 17 (1969) Reisenbeck vs. CA, 209 SCRA 657 (1992) Rural Bank of Caloocan vs. CA (April 21, 1981, 104 SCRA) Licuanan vs. Diaz (175 SCRA, July 21, 1989)

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Chan vs. CA (March 3, 1994, 230 SCRA) Meat Packing Corp vs. Sandiganbayan (June 22, 2001, 359 SCRA)

III. Loss or Impossibility A. Loss of Thing Due 1. Concept- Art. 1189[2] 2. Kinds a. As to extent i. Total ii. Partial 3. Requisites- Art. 1262 4. Presumption- Art. 1265, 1165 a. when not applicable 5. Effects a. b. c. d. in obligation to give a specific thing- Art. 1262, 1268 in obligation to give a generic thing- Art. 1263 in case of partial loss- Art. 1264 action against third persons- Art. 1269

B. Impossibility of Performance 1. Concept- Art. 1266, 1267 2. Kinds a. As to extent i. Total ii. Partial b. As to source i. legal ii. physical 3. Requisites- Art. 1266 4. Effects

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a. in obligations to do- Art. 1266, 1267, 1262 par. 2 (by analogy) i. impossibility distinguished from difficulty Cases Occea v. CA, 73 SCRA 637 (1976) Naga Telephone Co. v. CA, 230 SCRA 351 (1994) PNCC vs. CA, GR 116896, May 5, 1997, 272 SCRA b. in case of partial impossibility- Art. 1264 IV. Condonation or Remission A. Concept B. Kinds 1. As to extent a. Total b. Partial 2. As to form- Art. 1270 par. 1 a. Express b. Implied C. Requisites a. when formalities required- Art. 1270 par. 2 YAM vs. CA, G.R. No. 104726, February 11, 1999. D. Presumptions- Art. 1271, 1272, 1274 E. Effects 1. in general 2. in case of joint or solidary obligations F. Governing Rules- Art. 1270 G. Renunciation of Principal or Accessory Obligation 1. effects- Art. 1273 2. rationale V. Confusion or Merger of Rights A. Concept

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B. Requisites C. Effects 1. in general- Art. 1275 2. in case of joint (Art. 1277) or solidary obligations D. Confusion in Principal or Accessory Obligation- Art. 1276 VI. Compensation A. Concept- Art. 1278 1. Distinguished from Confusion B. Kinds 1. As to extent a. Total b. Partial 2. As to origin a. Legal b. Conventional- Art. 1279 inapplicable, 1282 c. Judicial- Art. 1283 d. Facultative C. Legal Compensation 1. Requisites- Art. 1279, 1280 a. due distinguished from demandable Cases Gan Tion v. CA, 28 SCRA 235 (1969) BPI v. Reyes, 255 SCRA 571 (1996) PNB v. Sapphire Shipping, 259 SCRA 174 (1996) CKH Industrial Development vs. CA (May 7, 1997, GR 111890, 272 SCRA) Mirasol vs. CA (GR 128448, Feb 1, 2001, 351 SCRA) Associated Bank vs. Vicente Henry Tan (GR 156940, Dec. 14, 2004) Villanueva vs. Francisco Tantuico Jr. (GR. 53585, Feb 15, 1990, 82 SCRA) Perez vs. CA (GR 56101, February 1984, 127 SCRA)

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Silahis Marketing Corp vs. IAC (Dec 7, 1989, 180 SCRA) BPI vs. CA (GR 116792, March 29, 1996, 255 SCRA) 2. Effects- Art. 1290, 1289 D. When Compensation is Not Allowed- Art. 1287, 1288 E. Compensation of Debts Payable in Different Places- Art. 1286 F. Effect of Nullity of Debts to be Compensated- Art. 1284 G. Effects of Assignment of Credit 1. with consent of debtor- Art. 1285 par. 1 2. with knowledge but without consent of debtor- Art. 1285 par. 2 3. without knowledge of debtor- Art. 1285 par. 3 a. rationale VII. Novation A. Concept- Art. 1291 B. Kinds 1. As to form a. Express b. Implied 2. As to origin a. Conventional b. Legal 3. As to object a. Objective or Real b. Subjective or Personal C. Requisites- Art. 1292 Cases Millar v. CA, 38 SCRA 642 (1971) Dormitorio v. Fernandez, 72 SCRA 388 (1976) Magdalena Estate v. Rodriguez, 18 SCRA 967 (1966) Reyes v. Secretary of Justice, 264 SCRA 35 (1996) Conchingyan vs. RB Surety and Insurance (June 30, 1987, 151 SCRA)

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Broadway Centrum Condominium Corp vs. Tropical Hut (July 5, 1993, 224 SCRA) Molino vs. Security Diners International (GR 136780, Aug. 16, 2001, 363 SCRA) Romeo Garcia vs. Dionisio Llamas (GR. 154127, December 8, 2003, 417 SCRA) California Bus Line vs. State Investment (GR 147950, December 11, 2003, 418 SCRA) Chester Babst vs. CA (GR 99398, Jan. 26, 2001, 350 SCRA) D. Effects 1. in general- Art. 1296 2. when accessory obligation may subsist- Art. 1296 E. Effect of the Status of the Original or New Obligation 1. nullity or voidability of original obligation- Art. 1298 2. nullity or voidability of new obligation- Art. 1297 3. suspensive or resolutory condition of original obligation- Art. 1299 F. Objective Novation 1. meaning of principal conditions G. Subjective Novation 1. By change of debtor a. Expromision i. requisites- Art. 1293 ii. effects- Art. 1294 b. Delegacion i. requisites- (vs. Art. 1293) ii. effects- Art. 1295 Case Garcia v. Llamas, 417 SCRA 292 (2003) Quinto vs. People, G.R. No. 126712, April 14, 1999. 2. By change of creditor: Subrogation of a third person in the rights of the creditor- Art. 1300 a. Conventional subrogation i. requisites- Art. 1301

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ii. distinguished from Assignment of Credit iii. effects- Art. 1303, 1304 Licaros Vs. Gatmaitan, G.R. No. 142838, August 9, 2001. b. Legal subrogation i. requisites ii. when presumed- Art. 1302 iii. effects- Art. 1303, 1304 Astro Electronics Corp. vs. Philippine Export And Foreign Loan Guarantee Corporation, G.R. No. 136729, September 23, 2003.

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Title II. Contracts Chapter I. General Provisions A. Definition Art. 1305 B. Elements 1. Essential elements (see Chapter II, infra) a. Consent b. Object c. Cause 2. Natural elements 3. Accidental elements (see D., 3., infra) C. Characteristics 1. Obligatory force Art. 1308 2. Mutuality Arts. 1308-1310 (see also Art. 1473) Case GSIS v. CA, 228 SCRA 183 (1993) Professional Academic Plans, Inc. Francisco Colayco and Benjamin Dino vs. Crisostomo (G.R. No. 148599, March 14, 2005.) 3. Relativity a) Contracts take effect only between the parties, their assigns and heirs Art. 1311 Cases Manila Railroad Co. v. La Compaia Trasatlantica, 83 Phil. 875 (1918) DKC Holdings Corp. v. CA, 329 SCRA 666 (2000) b) No one may contract in the name of another Art. 1317 Case Gutierrez Hmnos. v. Orense, 28 Phil. 571 (1914) D. Parties 1. Auto-contracts 2. Freedom to contract Art. 1306 Cases Gabriel v. Monte de Piedad, 71 Phil. 497 (1941) Pakistan International Airlines v. Ople, 190 SCRA 90 (1990) a. Special disqualifications 1) Art. 87, Family Code 2) Arts. 1490 and 1491, CC

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3) Art. 1782, CC 3. What they may not stipulate Art. 1306 a. Contrary to law, e.g.: 1) pactum commissorium (Art. 2088) 2) pactum leonina (Art. 1799) 3) pactum de non alienado (Art. 2130) b. c. d. e. Contrary to morals Contrary to good customs Contrary to public order Contrary to public policy Cases Cui v. Arellano, 2 SCRA 205 (1961) Arroyo v. Berwin, 36 Phil. 386 (1917) Filipinas Compaia de Seguros v. Mandanas, 17 SCRA 391 (1966) Bustamante v. Rosel, 319 SCRA 413 (1999)

E. Classification 1. According to subject-matter a. Things b. Services 2. According to name a. Nominate b. Innominate Art. 1307 Case Dizon v. Gaborro, 83 SCRA 688 (1978) Corpuz vs. CA (93 SCRA 424) 1) do ut des 2) do ut facias 3) facio ut facias 4) facio ut des According to perfection a. By mere consent (consensual) Art. 1315 b. By delivery of the object (real) Art. 1316 According to its relation to other contracts a. Preparatory b. Principal c. Accessory According to form a. Common or informal b. Special or formal According to purpose

3. 4.

5. 6.

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a. Transfer of ownership, e.g., sale b. Conveyance of use, e.g., commodatum c. Rendition of services, e.g., agency 7. According to the nature of the vinculum produced a. Unilateral b. Bilateral c. Reciprocal 8. According to cause a. Onerous b. Gratuitous or lucrative 9. According to risk a. Commutative b. Aleatory F. Stages 1. Preparation 2. Perfection 3. Consummation or death G. As distinguished from a perfected promise and an imperfect promise (policitacion) H. With respect to third persons 1. Stipulations in favor of third persons (stipulations pour autrui) Art. 1311, 2nd par. Cases Florentino v. Encarnacion, 79 SCRA 192 (1977) Coquia v. Fieldmens Insurance Co., 26 SCRA 178 (1968) Constantino v. Espiritu, 39 SCRA 206 (1971) Young vs. CA (169 SCRA 213) 1989 Marmont Resort vs. Guiang (168 SCRA 373) 1988 Mandarin Villa vs. CA (257 SCRA 538) 1996 2. Possession of the object of contract by third persons Art. 1312 3. Creditors of the contracting parties Art. 1313 4. Interference by third persons Art. 1314 Cases Daywalt v. Corp., 39 Phil. 587 (1919) So Ping Bun v. CA, 314 SCRA 751 (1999) Jose Lagon vs. CA and Lapuz (G.R. No. 119107. March 18, 2005) Chapter II. Essential Requisites of Contracts A. Consent 1. Requisites Art. 1319 a. Must be manifested by the concurrence of the offer and acceptance

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Cases Rosenstock v. Burke, 46 Phil. 217 (1924) Malbarosa v. CA, 402 SCRA 168 (2003) San Lorenzo Development Corporation vs. CA (G.R. No. 124242. January 21, 2005) MMDA vs. Jancom (G.R. No. 147465. January 30, 2002) Malbarosa vs. CA (G.R. No. 125761. April 30, 2003) 1) Offer a) Must be certain Art. 1319 b) What may be fixed by the offeror Art. 1321 c) When made through an agent Art. 1322 d) Circumstances when offer becomes ineffective Art. 1323 e) Business advertisements of things for sale Art. 1325 f) Advertisements for bidders Art. 1326 2) Acceptance a) Must be absolute Art. 1319 b) Kinds i. Express Art. 1320 ii. Implied Art. 1320 iii. Qualified Art. 1319 c) If made by letter or telegram Art. 1319, 2nd par. i. Four theories on when the contract is perfected: 1. Manifestation theory 2. Expedition thory 3. Reception theory 4. Cognition theory Art. 1319, 2nd par. d) Period of acceptance Art. 1324 Case Sanchez v. Rigos, 45 SCRA 368 (1972) e) Contract of option Art. 1324 b. Necessary legal capacity of the parties 1) Who cannot give consent Art. 1327 2) When offer and/or acceptance is made a) during a lucid interval b) in a state of drunkenness c) during a hypnotic spell c. The consent must be intelligent, free, spontaneous, and real Arts. 1330-1346 1) Effect Art. 1330 2) Vices of consent a) Mistake or error

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i. kinds 1. Mistake of fact a. as to substance of the object b. as to principal conditions c. as to identity or qualifications of one of the parties d. as to quantity, as distinguished from a simple mistake of account Case Asiain v. Jalandoni, 45 Phil. 296 (1923) Heirs of William Sevilla, et.al v. Leopoldo Sevilla, 402 SCRA 501 (2003) Dometilla Andres vs. Manufacturers Hanover and Trust (GR 82670, Sept. 15, 1989) Spouses Theis vs. CA (GR L126013, Feb 12, 1997) 2. Error of law a. General rule: Ignorantia legis neminem excusat Art. 3 b. Exception: Mutual error of law Art. 1334 ii. When one of the parties is unable to read Art. 1332 Cases Dumasug v. Modelo, 34 Phil. 252 (1916) Maxina Hemedes v. CA, 316 SCRA (1990) Lustan vs. CA (G.R. 111924, Jan 27, 1997) Katipunan vs. Katipunan (G.R. No. 132415. January 30, 2002) Leonardo vs. CA et al (G.R. No. 125485. September 13, 2004) iii. Inexcusable mistake Art. 1333 b) Violence and intimidation Art. 1335 i. Effect Art. 1336 Case

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Martinez v. Hongkong and Shanghai Bank, 15 Phil. 252 (1910) Lee vs. CA (G.R. No. 90423, September 6, 1991) c) Undue influence Art. 1337 d) Fraud or dolo Art. 1338 Cases Hill v. Veloso, 31 Phil. 161 (1915) Woodhouse v. Halili, supra Geraldez v. CA, 230 SCRA 320 (1994) Sierra vs. CA (G.R. No. 90270, July 24, 1992) i. Kinds 1. dolo causante Art 1338 2. dolo incidente Art. 1344, 2nd par. ii. Failure to disclose facts; duty to reveal them Art. 1339 Cases Tuason v. Marquez, 45 Phil. 381 (1923) Rural Bank of Sta. Maria v. CA, 314 SCRA 255 (1999) iii. Usual exaggerations in trade; opportunity to know the facts Art. 1340 Cases Azarraga v. Gay, 52 Phil. 599 (1928) Laureta Trinidad v. IAC, 204 SCRA 524 (1991) iv. Mere expression of an opinion Art. 1341 1. Effects Art. 1344 Case Songco v. Sellner, 37 Phil. 254 (1917) e) Misrepresentation i. By a third person Art. 1342 ii. Made in good faith Art. 1343 iii. Active/passive Cases Mercado and Mercado v. Espiritu, 37 Phil. 215 (1917) Braganza v. Villa Abrille, 105 Phil. 456 (1959)

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f) Simulation of Contracts Cases Rodriguez v. Rodriguez, 28 SCRA 229 (1914) Suntay v. CA, 251 SCRA 430 (1995) Pangadil et al vs. CFI (G.R. No. L-32437. August 31, 1982) Umali et al vs. CA (G.R. No. 89561. September 13, 1990) i. Kinds Art. 1345 1. Absolute 2. Relative Macapagal vs. Remorin, Caluza (G.R. No. 158380. May 16, 2005.) ii. Effects Art. 1346 B. Object of Contracts 1. What may be the objects of contracts Art. 1347 a. All things not outside the commerce of man b. All rights not intransmissible c. All services not contrary to law, morals, good customs, public, or public policy 2. Requisite - must be determinate as to its kind Art. 1349 3. What may not be the objects of contracts a. Future inheritance, except when authorized by law Art. 1347 Case Blas v. Santos, 1 SCRA 899 (1961) J.L.T. Agro, Inc. vs. Balansag and Cadayday (G.R. No. 141882. March 11, 2005) b. Impossible things or services Art. 1348 C. Cause of Contracts 1. Meaning of cause Art. 1350 a. In onerous contracts b. In remuneratory contracts c. In contracts of pure beneficence 2. As distinguished from motive Art. 1351 3. Defective causes and their effects: a. Absence of cause and unlawful cause Art. 1352 Case Liguez v. CA, 102 Phil. 577 (1957) b. Statement of a false cause in the contract Art. 1353 c. Lesion or inadequacy of cause Art. 1355

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Cases Carantes v. CA, 76 SCRA 514 (1977) Sps. Buenaventura, et. al. v. CA, 416 SCRA 263 (2003) 4. Presumption of the existence and lawfulness of a cause, though it is not stated in the contract Art. 1354 Chapter III. Form of Contracts A. General rule: Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. (Spiritual system of the Spanish Code) - Art. 1356 B. Exception: When the law requires that a contract be in some form in order that it may be valid or enforceable. (Anglo-American principle) - Art. 1356 Case Hernaez v. De los Angeles, 27 SCRA 1276 (1969) C. Kinds of formalities required by law: 1. Those required for the validity of contracts, such as those referred to in Arts. 748, 749, 1874, 2134, 1771, 1773; 2. Those required, not for validity, but to make the contract effective as against third persons, such as those covered by Arts. 1357 and 1358; and 3. Those required for the purpose of proving the existence of the contract, such as those under the Statute of Frauds in Art. 1403. Case Resuena vs.CA (G.R. No. 128338. March 28, 2005) Chapter IV. Reformation of Instruments A. Requisites (Art. 1359): 1. Meeting of the minds upon the contract; 2. The true intention of the parties is not expressed in the instrument; and 3. The failure of the instrument to express the true agreement is due to mistake, fraud, inequitable conduct, or accident. Cases Garcia v. Bisaya, 97 Phil. 609 (1955) Bentir v. Leande, 330 SCRA 591 (2000) Quiros vs. Arjona [G.R. No. 158901. March 9, 2004.] B. Cases where no reformation is allowed - Art. 1366 C. Implied Ratification Art. 1367

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D. Who may ask for reformation Art. 1368 E. Procedure of reformation Art. 1369 Cases Atilano v. Atilano, 28 SCRA 2232 (1969) Carantes v. CA, supra Sarming, et. al. v. Cresencio Dy, et. al., 383 SCRA 131 (2002) Chapter V. Interpretation of Contracts (Compare with Rules on Statutory Construction) A. Primacy of intention Arts. 1370, 1372 Cases Borromeo v. CA, 47 SCRA 65 (1972) Kasilag v. Rodriguez, 69 Phil. 217 (1939) Santi vs. CA (GR 93625, 227 SCRA 541, 1993) B. How to determine intention Art. 1371 Rapanut vs CA 246 SCRA 323 (1995) C. How to interpret a contract 1. When it contains stipulations that admit several meanings Art. 1373 Oil And Natural Gas Commission vs. Court Of Appeals [G.R. No. 114323. July 23, 1998.] 2. When it contains various stipulations, some of which are doubtful Art. 1374 Spouses Rigor vs. Consolidated Orix Leasing And Finance Corporation [G.R. No. 136423. August 20, 2002.] 3. When it contains words that have different significations Art. 1375 4. When it contains ambiguities and omission of stipulations Art. 1376 Chua vs. Court Of Appeals [G.R. No. 119255. April 9, 2003.] 5. With respect to the party who caused the obscurity Art. 1377 Rizal Commercial Banking Corporation vs. Court Of Appeals [G.R. No. 133107, March 25, 1999] 6. When it is absolutely impossible to settle doubts by the rules above Art. 1378 a. in gratuitous contracts Gacos vs. Court Of Appeals [G.R. Nos. 85962-63, August 3, 1992]

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b. in onerous contracts 7. When the doubts are cast upon the principal object so that the intention cannot be known Art. 1378 D. Applicability of Rule 123, Rules of Court (now Secs. 10-19, Rule 130) DEFECTIVE CONTRACTS Chapter VI. Rescissible Contracts A. Kinds Art. 1381 B. Characteristics 1. Their defect consists in injury or damage either to one of the contracting parties or to third persons. 2. They are valid before rescission. 3. They can be attacked directly only, and not collaterally. 4. They can be attacked only either by a contracting party or by a third person who is injured or defrauded. 5. They can be convalidated only by prescription, and not by ratification. C. Rescission Art. 1380 1. Definition 2. As distinguished from rescission under Art. 1191 Case Universal Food Corp. v. CA, 33 SCRA 1 (1970) Pryce Corporation vs. PAGCOR (G.R. No. 157480. May 6, 2005) Sps. Cannu vs. Sps. Galang [G.R. No. 139523. May 26, 2005.] Iringan vs. Court Of Appeals [G.R. No. 129107. September 26, 2001.] Rivera vs. Del Rosario [G.R. No. 144934. January 15, 2004.] Equatorial Realty Development vs. Mayfair Theatre (G.R. No. 133879. November 21, 2001) 3. Requisites: a. The contract is rescissible; b. The party asking for rescission has no other legal means to obtain reparation Art. 1383; The Union Insurance Society Of Canton vs. Court Of Appeals [G.R. No. 100319. August 8, 1996.] c. He is able to return whatever he may be obliged to restore if rescission is granted Art 1385; Rivera vs. Del Rosario [G.R. No. 144934. January 15, 2004.]

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d. The object of the contract has not passed legally to the possession of a third person acting in good faith Art. 1385; e. The action for rescission is brought within the prescriptive period of four (4) years Art 1389. 4. Effect of rescission Art. 1385 a. with respect to third persons who acquired the thing in good faith Art. 1385, 2nd and 3rd par. 5. Extent of rescission Art. 1384 Siguan v. Lim, et. al. , 318 SCRA 725 (1999) 6. Presumptions of fraud Art. 1387 a. Badges of fraud Cases Oria v. Mcmicking, 21 Phil. 243 (1912) Siguan v. Lim, et. al. , 318 SCRA 725 (1999) Suntay v. CA, supra China Banking Corporation vs. Court Of Appeals [G.R. No. 129644. March 7, 2000.] MR Holdings Ltd vs. Carlos (G.R. No. 138104. April 11, 2002) 7. Liability for acquiring in bad faith the things alienated in fraud of creditors Art. 1388 Chapter VII. Voidable or Annullable Contracts A. Kinds Art. 1390 B. Characteristics 1. Their defect consists in the vitiation of consent of one of the contracting parties. 2. They are binding until they are annulled by a competent court. 3. They are susceptible of convalidation by ratification or by prescription. Case Felipe vs. Heirs of Aldon (120 SCRA 628) C. Annulment 1. As distinguished from rescission 2. Grounds Art. 1390 3. Who may and may not institute action for annulment Art. 1397 Case Singsong v. Isabela Sawmill, 88 SCRA 623 (1979) Samahan Ng Magsasaka Sa San Josep vs. Valisno [G.R. No. 158314. June 3, 2004.] Malabanan vs. Gaw Ching (181 SCRA 84, 1990) 37

Armentia vs. Patriarca (18 SCRA 1253, 1966) 4. Prescription Art. 1391 Case Carantes vs. CA (76 SCRA 514) 5. Effect a. Mutual restitution Arts. 1398 and 1402 Cases Cadwallader & Co. v. Smith, Bell & Co., 7 Phil. 461 (1907) Velarde v. CA, supra David Ines vs.Court Of Appeals [G.R. No. 114051. August 14, 1995.] Arra Realty Corporation vs. Guarantee Development Corporation (G.R. No. 142310. September 20, 2004) 1) When one of the parties is incapacitated - Art. 1399 Katipunan vs. Katipunan [G.R. No. 132415. January 30, 2002.] 2) When the thing is lost through the fault of the party obliged to return the same Art. 1400 6. Extinguishment of the action a. By ratification Art. 1392 b. When the thing is lost through the fault of the person who has the right to file the action Art. 1401 D. Ratification 1. Requisites: a. The contract is voidable; b. The ratification is made with knowledge of the cause for nullity; c. At the time of the ratification, the cause of nullity has already ceased to exist. 2. Forms a. Express or tacit Art. 1393 b. By the parties themselves or by the guardian in behalf of an incapacitated party Art. 1394 3. Effects: a. Action to annul is extinguished Art. 1392
Case

Uy Soo Lim v. Tan Unchuan, 38 Phil. 552 (1918)

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b. The contract is cleansed retroactively from all its defects Art. 1396

Chapter VIII. Unenforceable Contracts A. Characteristics 1. They cannot be enforced by a proper action in court. 2. They are susceptible of ratification. 3. They cannot be assailed by third persons. B. Kinds Art. 1403 1. Unauthorized contracts a. Governing rules Art. 1404 2. Contracts covered by the Statute of Frauds Case Asia Production Co., Inc. vs. Pao [G.R. No. 51058. January 27, 1992.] Western Mindanao Co. vs. Medalle (79 SCRA 703) Limketkai Sons vs. CA (250 SCRA 523) Babao vs. Perez (102 Phil 756) Reiss vs. Memije (15 Phil 350) Villanueva vs CA (G.R. No. 107624. January 28, 1997)

a. Purpose of Statute Case Philippine National Bank v. Philippine Vegetable Oil Co., 49 Phil. 857 (1927) b. How ratified Art. 1405 Cases Carbonnel v. Poncio, et al., 103 Phil. 655 (1958) First Philippine International Bank vs. CA (G.R. No. 115849. January 24, 1996) c. Right of the parties when a contract is enforceable but a public document is necessary for its registration Art. 1406 3. Contracts executed by parties who are both incapable of giving consent to a contract a. Effect of ratification by the parents or guardian of one of the parties Art. 1407 b. Effect of ratification by the parents or guardian of both parties Art. 1407

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Chapter IX. Void or Inexistent Contracts A. Characteristics 1. Void from the beginning 2. Produces no effect whatsoever 3. Cannot be ratified Art. 1409 Cases Tongoy vs. CA (123 SCRA 99) Cui vs. Arellano University (2 SCRA 205) Chavez vs. PCGG (307 SCRA 394) Guiang vs. CA (291 SCRA 372) Castillo vs. Galvan (85 SCRA 526) B. Kinds Art. 1409 1. Contracts that are void a. Those whose cause, object, or purpose is contrary to law, morals, good customs, public order or public policy 1) When the act constitutes a criminal offense Art. 1411 a) in pari delicto rule 2) When the act is unlawful but does not constitute a criminal offense Art. 1412 a) in pari delicto rule Cases Menchacez vs. Teves (G.R. No. 153201. January 26, 2005) Angel vs Modales(G.R. No. 145031. January 22, 2004) 3) When the purpose is illegal, and money is paid or property delivered therefor Art. 1414 4) When the contract is illegal and one of the parties is incapable of giving consent Art. 1415 Cases Liguez v. CA, supra Relloza v. Gaw Cheen Hum, 93 Phil. 827 (1953) 5) When the agreement is not illegal per se but is prohibited Art. 1416 Cases Philippine Banking Corp. v. Lui She, 21 SCRA 52 (1967) Frenzel v. Catito, 406 SCRA 55 (2003) Acabal and Nicolas vs. Acabal (G.R. No. 148376. March 31, 2005)

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Frenzel vs. Catito (G.R. No. 143958. July 11, 2003) 6) When the amount paid exceeds the maximum fixed by law Art. 1417 7) When by virtue of a contract a laborer undertakes to work longer than the maximum number of hours of work fixed by law Art. 1418 8) When a laborer agrees to accept a lower wage than that set by law Art. 1419 9) When the contract is divisible Art. 1420 10) When the contract is the direct result of a previous illegal contract Art. 1422 Those whose object is outside the commerce of man Those which contemplate an impossible service Those where the intention of the parties relative to the principal object of the contract cannot be ascertained Those expressly prohibited or declared void by law

b. c. d. e.

2. Contracts that are inexistent a. Those which are absolutely simulated or fictitious (see Arts. 1345 and 1346) b. Those whose cause or object did not exist at the time of the transaction C. Right to set up defense of illegality cannot be waived Art. 1409 D. The action or defense for the declaration of the inexistence of a contract 1. does not prescribe Art. 1410 2. is not available to third persons whose interest is not directly affected Art. 1421 Title III. Natural Obligations A. Definition Art. 1423 B. As distinguished from civil obligations Art. 1423 C. As distinguished from moral obligations Cases Villaroel v. Estrada, 71 Phil. 140 (1940) Fisher v. Robb, 69 Phil. 101 (1939) D. Conversion to civil obligation 1. By novation

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2. By ratification E. Examples Arts. 1424-1430

Title IV. Estoppel A. Definition Art. 1431 Case Kalalo v. Luz, 34 SCRA 337 (1970) B. Kinds 1. Technical estoppel a. By record b. By deed art. 1433 3. Equitable estoppel or estoppel in pais Art. 1433 C. Persons bound Art. 1439 Case Manila Lodge No. 761 Benevolent and Protective Order of the Elks v. CA, 73 SCRA 168 (1976) D. Cases where estoppel applies Arts. 1434-1438 Case Miguel v. Catalino, 26 SCRA 234 (1969) Read: Annotation, 32 SCRA 542 Mendoza vs. Reyes and CA (G.R. No. L-31618. August 17, 1983)

Title V. Trusts Chapter I. General Provisions A. Definition B. Governing rules Art. 1442 C. Parties Art. 1440 1. Trustor 2. Trustee 3. Beneficiary or cestui que trust D. Kinds Art. 1441

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Case Salao v. Salao, 70 SCRA 168 (1976) 1. Express Trusts a. Proof required Art. 1443 b. Form Art. 1444 c. Want of trustee Art. 1445 d. Acceptance by the beneficiary Art. 1441 2. Implied Trusts a. How established Art. 1441 b. How proved Art. 1457 c. Examples Arts. 1448-1456 Cases Fabian v. Fabian, 22 SCRA 231 (1968) Bueno v. Reyes, 27 SCRA 1179 (1969) Tamayo v. Callejo, 46 SCRA 27 (1972) Heirs of Sanjorjo vs. Quijano (GR. No. 140457. January 19, 2005) Aznar Brothers Realty Company vs. Aying (GR No. 144773. May 16, 2005)

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