attempt

oblicon: notes/transcriptions 4

2011-03-29T04:50:00.003-07:00

Parties in a contract

Incapacitated to give consent- voidable (valid until annulled)

Can be:

1. annulled in court

2. can be ratified by the aggrieved party (unless it is prohibited by law)

Incapacitated persons:

1. Minors

-estoppel applies here

Latches- barred because for a very long time (no fixed period) the person may have slept on the right by reason of inaction

Pahes- by reason of a particular act which the person benefits he will be denied the right to question such act (tihag vs sibonganoy)

This applies when a minor actively misrepresents his age. (not by omission)

-sale and delivery of necessaries to minors

-payment by a minor is valid as long as accepted by the creditor in good faith

2. Insane or demented

-all is presumed sane

-valid if entered into during lucid interval

-if there is a judicial declaration of insanity the burden of proof shifts (presumed to be insane and the insane has to prove that he is sane during the time he entered into contract)

-Manresa adds drunkenness and hypnotic spell as similar to insanity

Vices of consent

Fraud/deceit

-must come from the parties

-use of insidious words or machinations

-must be employed by either one of the parties (3^rd parties not allowed)

-failure to disclose facts when there is duty to do so: YES

-caveat emptor is not fraud when you have the opportunity to ascertain such facts: NO

-mere expression of opinion is not per se fraudulent except when it is made by an expert and you relied by such statement: NO- GR

-3^rd person misrepresentations is also not fraudulent- NO

Intimidation/threat/duress

-must produce a reasonable and well founded fear and must be imminent

-should be made against the ff persons ONLY:

1. party (person) or his property

2. spouse and descendant or ascendants

3. fiancé: there 2 schools of thought

-reverential fear is not included

-threat to file a case is not the kind of violence or intimidation that vitiates a contract, it is not a grave threat rather it is a right or remedy

-the intimidation may come from a third party

Violence

-violence vs intimidation: violence includes the serious and irresistible physical force (no physical force in intimidation)

-would the party enter into the contract without the violence? If no, then the consent has been vitiated!

Error or mistake

-must refer to error in facts but not in law (you believe that you bought a property 10000 sq meters when in fact it is only 9500 sq meters) (had you known of the fact that it is not 10000 sq meters you would have not bought it)

-mistake in law: you thought that it is pacto de retro (right to repurchase, can buy the property within a certain period of time, must file for consolidation of ownership if the original seller is not able to repurchase the property) (conditional sale compared to pacto de retro= there is no sale only subject to a suspensive condition) when it is not

-mutual mistake of the legal effect of an instrument will vitiate the consent- go to court and ask for a reformation of contract

-mistake must be substantial

-ignorance of the law excuses no one

-reason why a law should be published (notice to the world)

Undue influence

- advantage must be improper

There can be UI:

-employee and employer

-parents to children

-financial distress

-mental weakness

-confidential relationship

Simulation of contracts

1. Absolute- void

2. Relatively simulated- the true agreement is valid between the parties (except if it cause damage to a third party or for an unlawful purpose)

Absolute

-there is intentional employment of a means to produce the appearance of a contract but there is really no contract to speak of (selling a property to a dummy= no transfer of ownership)

-there is no consideration (money or promise)

-a valid title cannot spring from a void title

Relatively simulated:

-parties are bound by their true agreement (read above exceptions)

-there are 2 contracts

1. true intent

2. apparent (ostensible)

Object

Public property and illegal drugs- beyond commerce of man

Must not be impossible:

Objectively impossible- ball that is same time a square

Relative impossibility- it is impossible to perform by the subject

Future object is valid

Must be determinate or at least determinable

Cause

- why a party assumes obligation

Case of Liguez:

-motive is important only when it becomes the cause (if it predetermines the existence of the contract)

-the cause of donation is generosity but when Lopez made the so called donation it was for a consideration (cohabitation)

-pari delicto: guilty parties cannot go to court and assail the validity of the cause (he who comes to court must come with clean hands)

1350 : the object in-

-onerous: promise of a thing or service

-remunatory: past service/ recoverable debt

-gratuitous: beneficence/ pure donation

1351

-motive is not same as cause

1352

-requirements of cause:

1. present

2. true

3. lawful

Effect of illegal cause

-if both are guilty, they cannot sue the other/ each other

1354

-cause is presumed to exist and to be lawful (even if consideration is not specifically mentioned it is presumed to be there)

READ CASE: ong vs ong

Promissory notes

-if it is anchored on preventing the prosecution from filing the case then such is void because it is against public policy

1355

-lesion must be with fraud, mistake or undue influence

FORM

-marga recitation:

1. check if such contract needs to be in writing or needs to be delivered or just plain consent

2. check if it is needed to be able to make contract valid or enforceable or for convenience

Validity= form as a requirement is indispensable

Enforceability= statute of frauds, valid but cannot be enforced

Convenience= to bind 3^rd persons (can’t ask/compel the register of deeds to change the name of the owner in the tct) or if 3^rd persons are affected

Donation of real and immovable property and acceptance	In a PUBLIC instrument for VALIDITY
Donation of personal property exceeding 5k	Needs to be IN WRITING for VALIDITY
Stipulation to pay moratory interest on loans	Must be IN WRITING for VALIDITY
Transfer of large cattles	Transfer of cert of reg for VALIDITY
Authority of an agent in sale of land (makes the authority and sale void)	Must be IN WRITING for VALIDITY
Principal loan and interest on contract of anti chrisis- payment will be from proceeds form certain farm or rent?	Must be IN WRITING for VALIDITY
Chattel mortgage	Must be registered in the RD for VALIDITY of the mortgage
REM	Needs to be registered in the RD for CONVENIENCE (bind 3^rd persons)

1356

-general rule: form is not required

EXCEPT:

Solemn
Real

1358

-needs to be in a PUBLIC DOCUMENT for CONVENIENCE

1. object is the creation, transmission, modification, extinguishment of real rights over IMMOVABLE property

2. Cession, repudiation, renunciation of HEREDITARY rights and CPG

3. power to administer properties

4. contracts where the amount involved exceeds 500 pesos needs to be in writing (can be private or public)

-last paragraph is related to statute of frauds

-remember: unless the buyer accepts and receives part of such good= if it is PARTIALY EXECUTED= ratification

Statute of frauds only applies to executory contracts!

REFORMATION

1359

-there must be meeting of the minds

-true intention is not expressed due to mistake, fraud, inequitable conduct or accident

Reformation is allowed:

1361- mutual mistake causes the instrument not to disclose real agreement

1362- one party makes a mistake and the other party is guilty of fraud/inequity

1363- ignorance, lack of skill and bad faith on the part of DRAFTER, CLERK, TYPIST

Reformation is NOT allowed:

-inter vivos with no condition: it would seem that while there is a contract it is unilateral so it is purely personal on the part of the donee

-will: personal to the testator

-real agreement is void

Parol Evidence rule:

-a party to a contract is not allowed to present testimonial evidence that would modify, alter or change the terms and conditions of a written instrument

-reformation is an exception to the parole evidence rule: when the party puts in issue in his pleadings the fact that the contract does not show the true intent of the parties (if defendant- put it in the answer)

Interpretation

1370

- Clear/ no doubt- apply literal meaning

- If words of the contract is in conflict with the intent then use the rules of interpretation

1371

-consider contemporaneous and subsequent acts to determine intent (creditor has the TCT of a land= can be deduced that the land is used as a security)

1372

-general words can mean specific

1373

-If capable of several meanings- use the one that fits the entire article- most keeping with the contract

Fine print rule

-valid but if there are ambiguities, construe it in favor of the party who merely signed

Defective contracts (listed according to the degree of defect)

1. Rescissible

-valid but becomes defective due to lesion

-ward, minor, prejudice to creditors

-includes prejudice in right to fist refusal and those filed by compulsory heirs

2. Voidable

-can be ratified

-defective due to vitiated consent or incapacity to give consent

3. Unenforceable (does not follow statute of frauds)

-valid but not enforceable until ratified (cannot be brought to court for performance)

4. Void

-no legal effect and cannot be the subject of ratification

Rescission

-damage resulting from a contract

Difference between 1191 and 1380

1191- None fulfillment

1380- creditors must have no other remedy

Requisites: VLLSRP

1. Valid contract

2. There is lesion or damage (1/4)

3. Law allows rescission

4. Is only a subsidiary remedy

-judgment is rendered and if there is no appeal after 15 days- file for finality of judgment

-ask for writ of execution- sheriff will go after plaintiffs COH, COB, personal prop, real prop

-if still none sheriff will make a report

-rescission can then be availed

5. There must be restitution, unless there is nothing to return (due to unjust enrichment principle)

6. The object of the contract must not be in the legal possession of a 3^rd person who acted in good faith (must have no knowledge of the act that makes the contract rescissible)

Mirror principle

-annotations in a TCT/ adverse claims (can be cancelled in 30 days)/ notice of lis pendes (subject of a case)

-buyer in order to be protected by law or to be in good faith must check the annotations, however, he is not required to go beyond what appears in the title

-if there is an issue or claim then you should investigate further

7. direct action only- rescision

Article 1380

Recsissible	Voidable/annulable
Based on lesion or fraud upon creditors	Based on non performance or non fulfillment
Can be instituted by a third party	Only the parties can institute

Article 1381

INSTANCES:

1. Guardian or wards- ¼ of the original value of the thing (if there is court approval the contract entered into by the guardian is valid regardless if there is lesion)

2. Absentees- ¼ of the original value of the thing

3. Fraud of creditors- creditors CANNOT in any other matter collect

4. Those under litigation

5. Premature payments by insolvent (w or w/out judicial declaration)

6. Violation of right of first refusal

7. Others

Article 1382

-payment made is a state of insolvency which is not yet due and demandable maybe rescinded

1383

-rescission is a SUBSIDIARY action

-principal remedy must be unavailing

1384

-partial rescission is allowed

1385

-MUTUAL RESTITUTION

-you must be able to also return the things that were given to you

- object plus fruits and price plus interest

1387

PRESUMPTIONS OF FRAUD

Gratuitous alienation (IF DID NOT RESERVE SUFFICIENT PROPERTY TO PAY ALL DEBTS B4 DONATION)
Onerous alienation (if there is JUDGMENT and WRIT OF ATTACHMENT)

Badges of Fraud

-fictitious or inadequate consideration

-transfer or property during pendency of suit against the debtor where there is no other property to satisfy judgment

-sale on credit by an insolvent debtor

-transfer of all or substantially all assets

-complete insolvency or large debt

-Transfer bet parent and child

-failure of vendee to take exclusive possession of all the property

Article 1388

Subsequent transfers

1^st transfer: if in good faith (GF and BF of the next transfer is immaterial) (no RESCISSION)
1^st transfer: if in bad faith (next transfer is liable if also in bad faith)

Article 1389

Prescription:

4 yrs from the time the action or accrues and to be reckoned from the time it is legally possible
4 yrs after reaching age of majority or after guardianship or after his whereabouts is unknown

Can be instituted by the:

Injured party
Heirs (compulsory/forced)
Etc (succesors)

VIODABLE

Valid until annulled

1390

-incapable of giving of giving consent

-vitiated consent by:

M/V/I/U/F

1391

Prescription

-4 yrs from

a. ceases if through: I/V/U

b. discovery if through: M/F

fraud of registered land: discovery is reckoned from the date of execution of contract (usually notarized)

unregistered land: from the time the contract is submitted to the assessor’s office for purposes of changing the name of the owner for purposes of real property tax payment

c. incapacity: from the time guardianship ceases

1392

-effect of ratification: extinguish the action to annul a voidable contract

-cleanse defect from beginning

1393

-ratification can either be express or tacit

-prescription is also a form of ratification

-loss of the thing due to the fault of the injured party= estoppel

1394

-ratification does not need the consent of the guilty party

1395

-ratification has a retroactive effect

-mutual restitution applies (exception: case of incapacitated)

Who may file a case:

Party (principally or subsidiary liable)
Guilty party cannot file the case

1398

-same with rescissible: obj plus fruit/ price plus interest

Difference between Rescission and Voidable contracts

Rescission	Voidable
Lesion/ fraud of creditors	Incapacity of consent
Subsidiary action	Principal action
3^rd party can institute	3^rd party cannot institute an action
Damage is needed	Damage in not needed

Unenforceable

Unauthorized
Statute of frauds
Both are incapable of giving consent

Unauthorized

Entered into in the name of another person

-no authority

-legal rep

-acted beyond his powers

Ratification is required to make the contract enforceable, otherwise, if the supposed principal objects to the contract, the supposed “agent” becomes liable for damages, if any.

-a special power of attorney, general power of attorney or an authorization letter is needed

In case of SALE of REAL PROPERTY, and the agent does not have written authority, the sale is VOID, not just unenforceable! (art 1874)

1403

STATUTE of FRAUDS

-intended to prevent fraud and perjury in the enforcement of obligation by requiring certain contracts to be in writing

-evidence of the contract cannot be received w/o the writing or a secondary evidence of its content

2. statute of frauds

a. not to be performed w/in a yr from the making thereof

b. special promise- debt, default, miscarriage (only subsidiary or collaterally liable)

c. made in consideration of marriage

d. sale- more that 500.00

i. goods

ii. Chattels

iii. things in action- intangible

Leasing for more that 1 yr or sale of real properties
Representation as to the credit of a 3^rd person

Principles:

Apply only to executory contracts: no performance has yet been made

-oral evidence is OK if there is already partial performance

Action must be for damages or specific performance (if they filed a case for the deliver of goods and not because of the lease then statue of frauds will no apply)
Is EXCLUSIVE to the things listed in the code
Maybe waived
CANNOT be assailed by third persons (only affected parties)

VOID/INEXISTENT

If the cause is contrary to law, customs, public morals, public policy
Absolute simulation
Cause or object did not exist at the time of the transaction
Object is outside the commerce of men
Impossible service
Intention in relation to the principal object cannot be ascertained

Void

-when an element or elements of contracts are present but it (cause, object, consideration) is contrary to Law, Morals, Customs, Public order/policy

-pari delicto is applicable

-So the law will leave them as they are. No recovery is allowed.

-Either has no cause of action

-Neither party may demand performance

-but if also a criminal act both can be prosecuted

Inexistent

-one, some or all of the elements for validity is/are lacking

-pari delicto is not applicable

Examples:

Inexistent contracts (absolutely simulated contract/no consideration)
Not equally guilty
Prohibited conveyances/ not illegal per se (sale of land to a foreigner)
Illegal purpose not yet accomplished
Labor laws
Against government (illegal acts done by its officers/officials)

Principles

Right to question it cannot be waived
Action of defense does not prescribe
Not available to 3^rd parties if they are not prejudiced
Cannot give rise to a valid contract
Produces no effect
No action to declare them void is needed
Cannot be ratified
If it is the accessory which is invalid, the principal is still valid

oblicon: notes/transcriptions 3

2011-03-29T04:49:00.000-07:00

1231 (plcccno)

-obligations are extinguished through:

1. payment or performance

2. loss of thing due

3. condonation or remission

-forget about the whole thing

4. confusion or merger

-character of the debtor and creditor are merged

5. compensation

-2 persons are creditors and debtors of each other, can be total or partial

6. novation (dacion is a part of this)

-is the modification of an obligation by changing its object

or principal conditions

or by substituting the person of the debtor

-OLD CONTRAXT IS EXTINGUISHED BUT THERE IS A NEW CONTRACT

7. others (annulment, rescission, prescription, death= personal obligation, impossibility of performance, etc)

1232

-payment means delivery of money or

- performance in any other manner on an obligation (rendition of service)

Rules!!!!!!!!!!!!

-creditor has to accept the payment to extinguish obligation (express or implied)

Reason: creditor may refuse the payment validly under these conditions: (il3)

1. incomplete payment

2. not legal tender

3. paid by a 3^rd person who has no interest

-pre- existing obligation must exist so that there will be payment (option to buy is not a pre-existing obligation)

-burden of proof that the obligation has been paid is with the debtor

Factors to consider

What has been paid or delivered

1233- thing or service contemplated upon is delivered completely

1244- not a different object and debtor cannot substitute the act against the will of the obligee (specific)

1245- dacion en pago or novation (creditor consents to a different thing or service)

1246- generic thing (not demand superior (creditor) inferior (debtor)

1249- if money it must be in Phil. Peso or currency stipulated at the rate of exchange at the time of payment (case of new lumber and cf sharp: The repeal of R.A. No. 529 by R.A. No. 8183 has the effect of removing the prohibition on the stipulation of currency other than Philippine currency, such that obligations or transactions may now be paid in the currency agreed upon by the parties.)

-clearing period

1. bdo and china bank

X= depositor has an accnt in china bank (1M)

Y= creditor has an accnt in bdo

X issues a china bank check to Y (pay to d order of mr. Y/to cash or bearer if you use a fictitious name)

Y has 2 options:

a. Go to china bank and have the check encashed

-can avail of clearing only if check is a crossed check

b. Deposit the check in his bdo account

-Do will give/present it to china bank (drawee bank) for payment

-clearing period is usually 3 days

In case of a promissory note:

It is, as a rule, not a legal tender: creditor cannot be compelled to accept it and will only extinguish the obligation after it has been encashed or if the value of the check has been diminished due to the fault of the creditor (stale checks).

A cashiers/managers check is good as cash because it has certification that there are really enough funds in the account. Operates as an assignment of a part of the funds to the creditor, the moment it has been certified (the 1M in the account is automatically deducted with 1M). case of new pacific

In contractual obligations to pay money, in case of extraordinary inflation the value of the currency at the time of establishment of obligation shall be the basis of payment (case of singson, serra and lantion)

a. Inflation should be extra ordinary

b. 34% is not inflation

c. There must be a declaration by competent authorities that there is such extraordinary inflation

Special forms of payment: Dacion en pago and cession

1245

-Dation: property is alienated to the creditor in satisfaction of a debt in money

-governed by rules of sale

-form of novation

Elements:

a) creditor must consent because it shall be governed by the laws on sale which is characterized by its consensuality- filinvest: it must be clear and categorical that the object was received in order to extinguish the obligation (not to sell the property)

b) will not prejudice/defraud other creditors- accion pauliana (seek the annulment of the transactions entered into by the debtor) is the remedy for this

c) debtor is not declared insolvent: if insolvent he is no longer allowed to dispose his assets

-Cession: debtor transfers all the property not subject to execution in favor of his creditors so that the latter may sell them and apply the proceeds to their credits.

Requisites:

1. More than one debt

2. More than one creditor

3. Complete or partial insolvency (obligations exceeds the assets)

4. Abandonment of all debtors properties not exempt from exclusion

5. Acceptance or consent on the part of the creditors (all must agree- if does not agree go to court and file for insolvency because consent would no longer be needed)

How was it paid, delivered, performed

-rule on completeness of payment

(1233, 1248)

-creditor cannot be compelled to partially receive the prestations in which the obligation consists neither can the debtor be complied to make partial payments UNLESS

1. there is a stipulation

2. diff prestations are subject to diff conditions

3. joint debtor

4. solidary debtor

5. Work done in parts

6. debt is part liquidated and in part unliquidated

Exceptions

1234

-if substantially performed in good faith= strict and complete fulfillment less the damages suffered by creditor
(substantial breach)

1235

-if creditor accepts performance knowing is incompleteness and does not protest= obligation is deemed fully complied with

-mere acceptance of a partial payment is not equivalent to the required acceptance (qualified acceptance)

Partial payment ????????????????????????????

Who paid or delivered

Must be debtor or his agent (establish first that person is a third party: recitation of Arnold)

creditor is not bound to accept from a third party with no interest in the fulfillment of the obligation

Exception (1236)

1. There is a stipulation

2. The third person has an interest in the said obli (co-debtor, guarantor, joint debtor)

If with knowledge and consent= reimbursement and subrogation (placed in the shoes of the creditor, he is now the creditor)

If without= only beneficial reimbursement: to the extent where the debtor has been benefited (may still claim the lacking money from creditor under solution indebeti)

Payment by incapacitated

Exceptions: money or fungible (can be consumed and replaced) in good faith

Who accepted the payment or delivery

Payment to incapacitated is valid if he has kept the thing delivered or insofar as the payment benefited him

Payment to a 3^rd party is valid if it redounded to the benefit of the creditor

When was payment or delivery made
Where was payment or delivery made

Loss of the thing due

1. Object perishes or physically destroyed

2. Goes out of commerce= illegal or cannot be the subject of legal obligation- feati case

3. It disappears/ lost

Performance

1. Physical impossibility

2. Legal impossibility- feati case

3. Moral impossibility

1262

Loss of determinate- not in delay and has no fault= obligation is extinguished= IMPORTANT: ELEMENTS

Still liable if:

1. Debtor is at fault

2. Liable for fortuitous event

a. Provision of law

· 1165- in default

· 1165- promises to 2 or more persons with diff interest

· 1268- arises from a crime

· 2159- payee in solution indebiti is in bad faith

b. Contractual stipulation

c. Nature/assumption of risk

1263

If generic obligation sill exists= genus never perishes

Exception:

1. The generic thing is delimited

2. Generic thing has been segregated which results to the thing to be come specific

1264

Court shall determine partial loss is so important as to extinguish the obligation

1265

Presumption that loss was due to debtors fault

Exception:
1. Earthquake, flood, storm, natural calamity, fire due to accident

1266

Personal obligation which becomes impossible to comply without debtors fault shall release him from the obligation.

Impossibility must exist after the constitution of the obligation

Legal- working on a non working day

Physical- install a motor on a boat that was lost after perfection of the obligation

1267 debtor may also be released

Difficulty beyond the parties’ contemplation (rebus sic stantibus= a principle in international law) same condition at the time of the contracting continue to exist

Not applicable to real obligation because the word used is service READ NAGA CASE!

Article 1267 speaks of "service" which has become so difficult. Taking into consideration the rationale behind this provision,⁹ the term "service" should be understood as referring to the "performance" of the obligation. In the present case, the obligation of private respondent consists in allowing petitioners to use its posts in Naga City, which is the service contemplated in said article. Furthermore, a bare reading of this article reveals that it is not a requirement there under that the contract be for future service with future unusual change. According to Senator Arturo M. Tolentino,¹⁰ Article 1267 states in our law the doctrine of unforeseen events. This is said to be based on the discredited theory of rebus sic stantibus in public international law; under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist the contract also ceases to exist. Considering practical needs and the demands of equity and good faith, the disappearance of the basis of a contract gives rise to a right to relief in favor of the party prejudiced.

1268

Debt of a thing certain and determinate proceeds from a criminal offense, the debtor shall not be exempted the payment of its price whatever maybe the cause of the loss

-unless when he delivered it the creditor refused to accept w/out justification

1269

-transfer of right from the debtor to the creditor in case of loss

A is obliged to deliver a car to B but C destroyed the car. B has the right to sue C and not A.

Condonation or remission

1270

Requisites:

1. There must be an agreement

2. Parties must be capacitated and must consent

3. Must be for liberality/gratuitous

4. Obligation must be demandable

5. Formalities of a donation= donation and acceptance must be in a public instrument (real property): read art 749 and 748 of civil code, 728,746,750 (if 5,000 and up needs to be in writing)

Art. 748. The donation of a movable may be made orally or in writing.

An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated.

If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing, otherwise, the donation shall be void.

Art. 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.

The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor.

If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.

Art. 746. Acceptance must be made during the lifetime of the donor and of the donee.

Art. 750. The donations may comprehend all the present property of the donor, or part thereof, provided he reserves, in full ownership or in usufruct, sufficient means for the support of himself, and of all relatives who, at the time of the acceptance of the donation, are by law entitled to be supported by the donor. Without such reservation, the donation shall be reduced in petition of any person affected.

Rules in testamentary procedures: example (take effect upon/after my death: donation mortis causa)

-witness must be seen to sign the docs, at least 2 witnesses, etc

*acceptance should be communicated during the lifetime of donor/donee

*donor must reserve means for support

Must not be INOFFICIOUS = contrary to the natural duty (legitime: inofficious if value of donation will affect the legitime of compulsory heirs)

Asset: 0

Previously D donated 10M assets

X and Y- compulsory heir (lets say ½ of the estate)

Spouse- (1/4 of the estate)

Free portion- (1/4 of the estate)

Donations will be collated so assets will become 10M

So X and Y- 5M and Spouse 2.5M

*applicable also in condonation

6. Accepted by the donee

Implied remission 1271,72,74

1271

Effect of delivery of private document (any doc not notarized such as promissory note) evidencing the credit

-must be a private document

-a remission is presumed

-promissory note is returned to debtor

Elements: delivery and voluntarily done

1272

Presumption of voluntary delivery

Private doc appears in the hands of the debtor

1273

Renunciation of principal extinguishes the accessory obli (not the other way around)

-accessory follows the principal

1274

Pledge- accessory obligation- presumed remitted when the thing pledged is already found in the hands of the debtor after it has been given/deposited to the creditor (PRINCIPAL OBLI IS STILL REMAINS ENFORCEABLE)

Usually in pawnshops

Mortgage: owner retains the thing

Pledge: thing is in the hands of the creditor

Confusion or merger

-when it involves various individuals

A issued a check to B as payment of obligation (payable to bearer). B gave the check to C as payment of his obligation. C paid the same check to A for his obligation to A.

A who issued the check is the debtor. A who received the check from C is also the creditor.

Practice of rediscounting:

X has a post dated check (50k, 02/20/2011). Since he still can’t use he check he sold it to Y for 48k. When Y receives the check and enchases it he will receive 50k thereby gaining 2k.

Must be principal creditor and principal debtor!!!! Guarantor and ect are not principal cred/debtor

1275

Obli is extinguished from the time the characters of creditor and debtor are merged in the same person

Compensation

-2 persons in their own right become debtors and creditors of each other

Legal compensation- takes effect by operation of law, no need of any document or act (1279)

Set- off - must be pleaded and proven in court (more appropriate in judicial compensation)

-a case is filed but the plaintiff against the defendant but defendant says yes I am liable but since you also owe me then we should just compensate each other

Voluntary or conventional- both parties agree on a compensation, usually done when legal compensation cannot be done (not yet due, object of obligation is not same)

-they must execute an agreement

Fungible- capable of replacement

Requisites:

1. Must be between the principal debtors and creditors

Example:

X is indebted to Y (50k). The son of Y, S, is indebted to X (50k). – there can be no compensation between X and Y here because S is not a principal debtor/creditor.

2. Merger must be clear and definite

3. The debts must be due

4. Obligation involved must be the same or identical (sums of money or fungible goods)

5. Must be liquidated and demandable

6. Neither of them there by any retention or controversy, commenced by third persons and communicated in due time to the debtor

Garnishment- same to attachment but to be used in deposits in bank

Attachment- when you file a case in court for collection of sum of money, you also ask for attachment. Upon filing of the case the assets of the defendant will be freezed.

Case of Gullas:

Bank and depositor has a creditor- debtor relationship. The relationship/contract here is really that of a loan where the bank is the debtor and the depositor is the creditor.

But if Y already filed a case in court and applied for writ of preliminary attachment and the court granted such petition, there is already retention.

Controversy is when debtor claims that he owns the 10M and not X. (Y only asked X to deposit the money in his account but X deposited it in his own account)

1287

Compensation is not proper in:

1. Depositum- simple deposit of the goods for safekeeping. This is based on trust and confidence.

2. Commodatum- chattel given to you for use w/out reward and u should return it

3. Claims for support due by gratuitous title- support to be given because it is mandated by law except if it is support in arrears= support that was supposed to be given in the past (compared to future support which cannot be the subject of compensation)

4. Obligations ex delicto- obligations arising from crimes under art 104 of RPC

5. Certain obligations in favor of government (taxes due to the government are not based on contract, they are not even debts) tax is based on law. The obli of the govt to you maybe based on a contract.

1285 ASK MARGA

Compensation in assignment of credit

*with consent of debtor

-debtor cannot set up compensation as against the assignee

-if you consent to the assignment it means you have waived your right

-therefore it is important that you have to make a reservation that you may still set up compensation

*with knowledge but w/o consent

-debtor can set up compensation regarding debts prior to assignment

*w/out the knowledge of the debtor

-debtor can set up compensation for all debts maturing prior to his knowledge of assignment

READ PAGE 457

Case of yusingco

The mortgagee becomes the owner: mortgage is extinguished but the principal obligation remains

Case of Garcia

Stockholders are not creditors of the corporation therefore there can be no compensation.

1280

debtor merged with creditor- principal and accessory is extinguished

debtor creditor merged with guarantor- only accessory is extinguished

Novation - modifying obligations

Takes place when there is new

1. Object or principal obligation or (dacion)

2. Debtpr or

3. Creditor

4. or a combination of any of them.

Can be extinctive or modificatory.

In extinctive there must be a clear intention to create a new obli and extinguish the old.

1291

Real- change the object or conditions

Personal change of person

Debtor (substituting) 1293

Expromision

Initiative must come from a 3^rd person

New debtor and creditor must consent

Old debtor must be released from his obligation

Rights of new debtor upon payment (refer to prev articles)

With knowledge and consent

Without consent

Delegacion

Initiative comes from old debtor

ALL parties must consent

Creditor (subrogating)

Conventional- agreement by all the parties (distinguish from assignment of credit, case of south city homes) READ!

Legal- by operation of law

1302 tiwasa!!!!!!!!!!!!!!!!!!!!!!!

Presumption of legal subrogation

(1) When a creditor pays another creditor who is preferred, even without the debtor's knowledge;

(2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;

(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latter's share.

Extinctive vs modificatory

Requisites:

1. Valid old obligation (void= no novation, voidable= valid till annulled)

2. Intent to extinguish or modify the old obligation

3. Substantial difference (incompatibility test)

4. Capacity and consent of parties except in expromision

5. Valid new obligation

1292- novation is not presumed

Express- declared in unequivocal/clear term

Implied- complete or substantial incompatibility

If time extension- there is no novation because the new period covers the old period

If time is decreased- there is novation because the new period does not cover the first period

Accessory only and does not affect the principal obligation.

Pledge, mortgage, guarantor

1293

Changing of debtor can be made w/out the consent of the old debtor but not w/out the consent of the creditor

1294

Effect of insolvency or non fulfillment of new debtor

A. Expromision= empromision

Old debtor will not be responsible for the new debtor’s insolvency or non fulfillment

Could also be applied if with knowledge contrary would put old debtor in a worse condition

1295

B. Delegation

Gen rule: old debtor will not be liable for non fulfillment

Requisites to hold old debtor liable

1. The insolvency was already existing and of public knowledge at the time of delegation

2. The insolvency was already existing and known to the debtor at the time of delegation

Note:

Not apply when

1. 3^rd person was only an agent

2. 3^rd person was only a guarantor

3. New debtor only wants to be jointly or partly liable

1296

Stipulation pour autrui

Gen rule: extinguishment of principal extinguishes accessory

Exception: accessory obli is made in favor of a third party= must give consent

1297

If new obli is void then the old shall subsist unless parties intended that the former relation should be extinguished in any event

1298

If old oli was void- no valid novation

If old obli was voidable:

If already annulled= void

If not yet= yes (maybe annulled by debtor/ can be ratified)

1299

If original obli was subject to a suspensive or resolutory condition the new one is subject to the same unless there is a contrary stipulation.

1300

Subrogation (change of creditor)

Legal or conventional

Legal is not presumed

1301

Conventional subrogation requires consent of the original parties and the 3^rd party

1303

Transfers all rights

Either against the debtor or against 3rd persons

1304 Partial Subrogation

Creditor gives partial payment

A owes B 500. C pays 250 to B.

B has right to recover 250 as well as C.

B should be preferred when it comes to payment.

Basic Principles and Characteristics of Contracts

Liberty/mutuality/relativity/consentuality/obligatory force

1306

Must not be contrary to laws, morals, good customs, public order or public policy

*doctrine of

*non impairment of contracts is guaranteed by the constitution

Law

examples: labor standards and social legislations, pactum commissorium clause- prohibition on automatic appropriation of a property that is made as collateral in an obligation usually loan.

example: B borrowed money from C in the amount of 1 M and D executed a real estate mortgage relating to a parcel of land. The agreement was that in case of default the land will automatically become theirs.- pactum commissorium

Foreclose the mortgage so that the debtor can still join in the auction and may be able to buy back the land.

Recto law-should the vendee in a contract of sale of personal property the price which is payable in installments default in the payment of two or more of the agreed installments, the vendor may:

1. exact fulfillment of the obligation or

2. cancel the sale or

3. foreclosure the chattel mortgage= usually in sale of cars

These remedies are alternative and not cumulative such that the exercise of one would bar the exercise of the others. Thus foreclosure of the mortgage and the actual sale of the mortgaged chattel for example, would bar any action to recover the deficiency of the purchase price. (example Toyota: cannot recover the deficiency after auction/foreclosure from the debtor) car worth 1M but auctioned at 700k only

Maceda law-in the sale or financing of real estate on installment payments, excluding those covered by sales to tenants under RA 3844, as amended by RA 6389, where the buyer has paid at least 2 years of installments but defaults in the succeeding installments, the buyer has the following rights:

1. To pay without additional interest the unpaid installments due within the total grace period earned by him, which is fixed at one month grace period for every one year of installment payments made,

2. If the contract is cancelled, to receive the cash surrender value on the payments on the property made and after five years of installments, an additional 5% every yr but not exceed 90%of the total payments made

jurisdiction of court- to be determined by Congress, constitutional prohibition included)

jurisdiction of the court: the authority of a court to hear a particular controversy (example: contract of lease must be filed at RTC when the law provides that it can only be filed at the MTC or 1^st level courts)

venue of the court: where the court seats, who files the case has the option where the venue will be (his residence or the residence of the plaintiff)

must contain exclusivity:

In case of dispute arising from this contract can only be filed before the appropriate court of Cebu City, to the exclusion of all others.

Contract of adhesion: aka fine print rule

Contracts prepared solely by one party and the other party merely affixes his signature (any doubts shall be resolved against the one drafting the contract)

Constitutional prohibition: selling of lands to foreigners

Morals: (examples: scholarship grants for school propaganda purpose better if you just ask for damages (Cui case), excessive interest rates (Medel case)

Good customs (only when it does not render applicable statutes inoperative)

Public order (usually, public order considerations are already found in laws and local ordinances enacted pursuant to police power of the state and of local governments like zoning ordinance)

Public Policy

examples:

undue restraint of trade (case of Ferrazini case)- contract should state the time and place of restriction, to the extent necessary to protect the business/reasonableness,

an agreement that stifles the right of the state to prosecute, agreements allowing middleman 10% quota allocation in foreign exchange (Tee case) or of the amount that will be approved by the Import Control Office (Sy Suan Case) READ these cases!

Affidavit of desistance in criminal cases: by themselves cannot be considered as basis for the dismissal of the case because the party is already the state and not the private individual (can be dismissed because lack of witness or evidence)

Mutuality

1308: the contract must bind both contracting parties, it’s validity or compliance cannot be left to the will of one of them

*effects: a party cannot revoke or renounce a contract without the consent of the other party, nor can the contract be set aside on the ground that he had made a bad bargain

*if facultative resolutory, however, it is valid.- resolutory on the part of the debtor

Applications: case of allied bank

-unilateral increase if interest rate

Relativity

1311: contracts take effect only between parties, their assigns and heirs

Effects: a person cannot revoke, renounce, annul, set aside or nullify a contract to which he is not a party, nor can he ask for the performance or enforcement of said contract, nor be prejudiced by the said contract (res inter alius acta)

Exceptions:

1. Nature, stipulation, law- contract of partnership/ contract of agency/ money debts: go to the estate of the person 1st

2. Stipulation pour autrui- stipulation in favor of a 3^rd party

3. Interference with contractual relations-

4. Third person adversely affected by contract and accion pauliana- collective contracts like CBA

5. Accion directa- creditor sue on a contract entered into by his debtor

6. Contracts creating real right

Consensuality- the elements of a contract

If consensual- COC

If real- COCD

If formal- COCF

Stages:

-negotiation: on terms and conditions

Important in dealing with issues in interpretation of the terms and conditions (to determine the intent)

There are rules that govern the parties during the negotiation stage. There are even rules and duties while still negotiating.

-perfection

Because obligations start from this phase, you can compel the other party to perform already

When there is meeting of the minds there is already perfection: if there are some issues then lawyers will have something to do J

-consummation

To know whether or not an obligation has already been complied with

Perfection- with reference to the way acceptance is made

Option Contract

A offered a parcel of land to B in the amount of 10M. B asked for 30 days to decide. A agreed gave him March 1 to 30 to decide. On March 25 B informed A that he will buy the land but A said that the land is already promised to C at 11M.

Is there a perfected contract? Can B sue A?

There can be withdrawal of the offer before the acceptance and made to the knowledge of the buyer or communicated to the buyer.

Except:

1. When it has already been accepted

2. When there is a valid option contract where the seller has to respect the period agreed upon

There is perfection if there is an option money involved because there is already a consideration. Consideration is either money or a promise.

Option money- not part of the purchase price, cannot be deducted of the purchase price, cannot get it back

Earnest money- reservation, part of purchase price UNLESS there is a stipulation to the contrary (you may get this back unless there is a contrary stipulation)

1324 vs 1479

PUT THE PROVISION HERE

Sanchez vs Rigor

The term accepted unilateral promise to sell in 1479 is interpreted as accepting the option.

A made a unilateral promise to sell his land to B worth 10M. A gave him 30 days and B does not give a comment or answer on this. After some time B said that he is already willing to accept the unilateral promise. This acceptance should be construed as accepting the offer of 30 days to think (option contract).

Theories: MERC

Manifestation: the moment acceptance is MADE

Expedition: the moment acceptance is TRANSMITTED

Reception: the moment the acceptance is RECEIVED BY THE OFFERER

Cognition: the moment acceptance comes to the KNOWLEDGE OF THE OFFERER

Consent

Meeting of the minds- the concurrence of an offer that is certain and acceptance that is absolute upon the thing and the cause

Cognition theory is not followed in withdrawal of offer (school of thought B)

In withdrawal of acceptance such withdrawal must reach the offeror 1^st before the letter of acceptance

Requisites for the MEETING of the MINDS

1. An offer that is CERTAIN

2. Acceptance must be UNQUALIFIED and ABSOLUTE

What about in ads?

Mere invitations only and not certain offers!

Except: if the ad is very specific as to its particulars (if you still have some things to ask it is still not certain!)

Must be definite in the object and the cause/consideration!

If the acceptance asks for something/char then it becomes a counter offer thus it needs the acceptance of the original offeror to make the ncontract perfect. - w/out any variance of any sort form the offer

An offer becomes ineffective upon the death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed

Marlbarosa vs CA

Under 1319 an offer can be breached at any time until it is accepted

Application of Payments

1252

-which among the two or more debts of the debtor is being paid

-debts must be of the same kind and by the same debtor to the same creditor

-all debts must be due

Step 1:

Debtor makes the designation. If not the creditor makes it in the receipt he issues. If none of them makes it, follow Art. 1253 and 1254.

1253

-interest must be paid first (debtor cannot insist, but if creditor agrees then its all right)

1254

-if payment cannot be applied using the preceding rules:

1. apply it to the most onerous (if debts are if diff nature)

2. application shall be made to them proportionately (if he same nature)

Tender of Payment and Consignation

Tender of payment- act of offering the creditor what is due to him together with a demand that he accept it

Consignation- the act of depositing the thing due with the court or judicial authorities whenever the creditor refuses to accept such

1255

Consignation- the act of depositing the thing due with the court or judicial authorities whenever the creditor refuses to accept such

1256

-consignation releases debtor from responsibility

General Rule: tender payment first before consignation

Exceptions:

1. Creditor is absent or unknown or does not appear at the place of payment

2. Creditor is incapacitated

3. Refuses w/out just cause (weird)

4. 2 or more persons claim the same right

5. The title of the obligation is lost

6. Creditor previously notified debtor that he refuses to accept payment

Consignation is only for debts. Right of redemption is not a debt.

1257

-requisites for consignation:

1. Valid debt

2. Valid prior tender

3. Prior notice of consignation

4. Actual consignation

5. Subsequent notice of consignation

1258

-consignation shall be made by depositing the things due at the disposal of the judiciary

1260

-once consignation has been duly made, the debtor may ask for the cancelation of the obligation

-before a judicial declaration the debtor may withdraw the thing or the sum deposited (before the creditor accepts the consignation, when creditor authorizes debtor to withdraw)

If consignation is improper= no consignation

If case is dismissed= no consignation

oblicon: notes/transcriptions 2

2011-03-29T04:47:00.001-07:00

Central Bank Circular 905

- suspended or rendered the Usury Law inoperative

(Jan. 1, 1983; Security Bank vs. RTC)

- parties can now agree on any interest rate

Art. 1306

-The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to

law,

morals,

good customs,

public order, or public policy. (Liberality principle/freedom to stipulate provisions)

Cauton vs CA

The stipulated interest rates are illegal if they are unconscionable.

Mendel vs Ca : 5.5% per month

Solangon vs. Slazar: 6% per month

Moratory

-accrues on the date stipulated in the contract

Compensatory

- accrues on extrajudicial or on judicial demand (if no demand letter was sent)

Eastern Shipping Lines, Inc. v CA

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extra judicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

Art. 2212
-Interest due shall earn legal interest from the time it is judicially demanded, although the obligation may be silent upon this point.

David vs CA

In cases where no interest had been stipulated by the parties, no accrued conventional interest could further earn interest (compound interest) upon judicial demand.

1176- Presumptions

Recision

Art. 1191
- based on breach of the obligation/ faith

- For reciprocal obligations

- Also called resolution

- Contemplates judicial action – court determines if there are grounds to terminate the contract

Exceptions:

*extra judicial rescission is stipulated in the contract/ agreed upon by the parties

* there is no delivery (transfer of ownership) yet

!!!Gen. rule: if property has been delivered, rescission needs judicial action

If seller forces defaulting obligor to give up property, Grave coercion would be committed.

Art. 1380 – based on economic injury – somebody considered by the law as incapacitated to enter into a contract, minors or wards, is capacitated by somebody else (ex. Guardian).

Ex. Guardian sells his ward’s property for a price 50% lower than the market value.

Ward suffers a Lecion (nalugi) – if > than 25%

Can be rescinded by guardian if guardianship has been terminated

Can be rescinded by ward if he is of age

Important rules

1. Non conjuctive

Injured party can ask for/ choose between specific performance (+damages) or rescission (+damages), not both.

2. Rescission in 1191 can only be availed if the breach is substantial. If the breach is slight, the contract can’t be cancelled.

DBP vs CA

Regular and substantial payments were made. Late payments were accepted without protest. The breach of obligation was slight.

Central Bank vs. Bichara

Non-payment of purchase price at the stipulated date without a valid and good reason is a substantial breach

3. Rescission can only be demanded if the injured party is ready and able to comply with his obligation

4. Rescission abrogates the contract from its inception and requires restitution of benefits received

What has been delivered must be returned

As if no contract has been entered into

5. Rescission can be carried out only when the one demanding can return whatever he may be obliged to restore

Lim vs CA

Only the injured party can exercise rescission under 1191.

Golden Road vs CA

Ernest money should be returned since it forms part of the purchase price.

Unless there is a forfeiture provision in the contract. (In case of.... by reason of fault of the buyer... the [ernest money amount] the will be forfeited in favor of the seller)

(Article 1182)

Potestative – depends upon the will of one of the contracting parties.

Potestative on the part of the debtor.

If suspensive – the obligation is VOID. Even if the condition is fulfilled, the obligation is not demandable.

If resolutory– the obligation is VALID.

Potestative on the part of the creditor.

The obligation is valid whether the condition is suspensive or resolutory.

(Article 1183)
If the condition is not to do an impossible thing, it shall be deemed as not having been agreed upon. Thus, the obligation is immediately demandable.

(Article 1187)
Effect of fulfillment of suspensive condition GENERAL RULE:

The effect of the fulfillment of the suspensive condition retroacts to the day of the constitution of the obligation.

EXCEPTIONS: There shall be no retroactive effect with respect to the fruits and interest as follows:

1. In reciprocal obligations, the fruits and interest shall be deemed to have been mutually compensated (each party shall keep the fruits and interest received by him prior to the fulfillment of the condition).

2. In unilateral obligations, the debtor keeps the fruits and interests received before the fulfillment of the condition.

(Article 1888)
Rights of the parties before the fulfillment of the condition

§ Creditor - He may bring the appropriate actions for the preservation of his rights, such as registering his claim with the Register of Deeds, if appropriate, to notify all third persons.

§ Debtor - He may recover what he has paid by mistake.

(Article 1189)

Rules in cases of loss, deterioration or improvement of determinate thing before the fulfillment of the suspensive condition

Loss of the thing

Without debtor’s fault – obligation is extinguished.
With debtor’s fault – debtor is obliged to pay damages.

A thing is considered lost when it perishes, or goes out of commerce or disappears in such a way that its existence is unknown or cannot be recovered.

Deterioration of the thing

Without debtor’s fault – impairment shall be borne by the creditor.
With debtor’s fault – the creditor may choose between the following remedies:

i. Rescission + damages

ii. Fulfillment + damages

(Article 1991)

remedies are alternative, not cumulative subject, however, to the exception that he may seek rescission even after he has chosen fulfillment, if the latter should become impossible.

(Article 1193)

A day certain is that which must necessarily come although it may not be known when. An example is the death of a person, which will necessarily come.

Period distinguished from condition

As to fulfillment

A condition is an event that may or may not happen; a period is an event that must necessarily come, at a date known beforehand, or at a time that cannot be determined.

As to time

A condition may refer to the future or to a past event unknown to the parties; a period always refers to the future.

As to influence on the obligation

A condition causes an obligation to arise or to cease; a period merely fixes the time for the efficaciousness of an obligation.

As to effect, when left to debtor’s will

A period, the duration of which depends upon the will of the debtor, empowers the court to fix the duration thereof, while a condition, which depends upon the sole, will of the debtor, makes the obligation null and void.

As to retroactivity of effects

The arrival of the period does not produce retroactive effect, while the happening of a condition has retroactive effects.

(Article 1196)

Presumption as to who has the benefit of the period

Therefore, the debtor cannot be compelled to perform, and the creditor cannot be compelled to accept performance, before the term expires.

(Article 1198)

When debtor loses his right to make use of the period if it is his benefit; the creditor may demand immediate payment:

When he becomes insolvent, unless he gives a guarantee or security for the debt.
When he fails to furnish the guaranties or securities that he has promised.
When he impairs the said guaranties or securities by his own acts, or when through fortuitous event they disappear, unless he gives new ones equally satisfactory.
When he violates any undertaking in consideration of which the creditor agreed to the period.
When he attempts to abscond.