Contracts Stages in the life of a contract

Chapter 1 General Provisions 1. Preparation or Conception

Article 1305
 All steps taken to perfect the contract
A contract is a meeting of the minds between two
persons whereby one binds himself, with respect to the  Negotiation or bargaining point
other, to give something or to render some service
 There is an offer but no meeting of
Meaning of a Contract: minds yet (nagtatawaran palang)
1. Meeting of the minds between two contracting 2. Perfection or Birth
parties
 Meeting of the minds regarding the
2. Takes place when an offer by one party is subject matter and cause of the contract
accepted by the other
 Agree on the terms of the contract
3. One or more persons bind himself or themselves
with respect to another or others, or reciprocally, 3. Consummation
to the fulfillment of an obligation to give, to do, or  Parties have performed their respective
to render service, or to refrain from doing obligations and so the contract is put to
something an end
Example:  Extinguish obligation
Contract of sale – bilateral
Example:
Contract of loan – unilateral
Offer to sell for 50k, offer to buy for 40k = preparation or
Contract and Obligation Distinguished conception

Offer to sell for 45k, offer to buy for 45k = perfection or

Contract Obligation birth
One of the sources of The legal tie or relation
Seller delivers to buyer, buyer pays seller =
obligations itself that exists after a
contract has been consummation
entered into
Classifications of Contracts
No contract if there is no obligation
According to Perfection
Obligation may exist even if there’s no contract (by law)
1. Consensual Contracts perfected by mere meeting
Contracts and Agreements Distinguished of the minds (sale, lease)
2. Real Those which require both consent
Contracts Agreements
and delivery of the object for their
Are binding agreements Cannot be enforced by perfection (creation of real rights over
enforceable through legal action in the courts of immovable property must be written,
proceedings in case the justice deposit and pledge)
other party didn’t comply
3. Formal Contracts which must appear in
To be valid and Merely moral or social writing (donation, chattel mortgage)
enforceable, contract agreements
According to Cause
must be lawful and all
requisites are present
1. Onerous Each parties aspires to procure
All contracts are agreements for himself a benefit through the
giving of an equivalent or
Not all agreements are contracts compensation (sale)
2. Gratuitous One of the parties proposes to
give to the other benefit without
any equivalent or compensation
(commodatum)
3. Remunerative For service previously rendered
According to Degree of Dependence

Principle of Mutuality of Contracts

1. Principal One which can subsist independently
from other contracts and whose Article 1308
purpose can be fulfilled by The contract must bind both contracting parties; its
themselves (sales, lease) validity or compliance cannot be left to the will of one of
2. Accessory One which can exist only as a them. (1256a)
consequency of, or in relation with,
another prior contract (pledge, *Must have mutual consent to the contract
mortgage) *bad bargain in itself does not necessarily violates
3. Preparatory One which has for its object the mutuality of contracts (because you accepted it)
establishment of a condition in law
which is necessary as a preliminary Article 1309 – exception to the principle of mutuality of
step towards celebration of another contracts
subsequent contract. (partnership, The determination of the performance may be left to
agency)
a third person, whose decision shall not be binding
Note: If one of COC is not present = VOID (not until it has been made known to both contracting
voidable) parties. (n)
Autonomy of Contracts Example: A and B agrees for C (third person) to
Article 1306 – Autonomy of Contracts, Freedom to determine the price of the land = valid and binding,
stipulate because the decision is known to the contracting parties
The contracting parties may establish such
Article 1310
stipulations, clauses, terms and conditions as they
may deem convenient, provided they are not contrary The determination shall not be obligatory if it is
to law, morals, good customs, public order, or public evidently inequitable. In such case, the courts shall
policy. (1255a) decide what is equitable under the circumstances. (n)

Example: vote buying – contrary to law and public If inequitable = courts will decide what is equitable
policy
Principle of Relativity of Contracts
Article 1307 Article 1311
Innominate contracts shall be regulated by the Contracts take effect only between the parties, their
stipulations of the parties, by the provisions of Titles I assigns and heirs, except in case where the rights and
and II of this Book, by the rules governing the most obligations arising from the contract are not
analogous nominate contracts, and by the customs of transmissible by their nature, or by stipulation or by
the place. (n) provision of law. The heir is not liable beyond the value
of the property he received from the decedent.
Innominate – no specific names or specific designation
If a contract should contain some stipulation in favor
Nominate – has specific name or specific designation of a third person, he may demand its fulfillment
4 Kinds of Innominate contracts provided he communicated his acceptance to the obligor
before its revocation. A mere incidental benefit or interest
1. Do ut des (I give that you may give) of a person is not sufficient. The contracting parties must
have clearly and deliberately conferred a favor upon a
2. Do ut facias (I give that you may do) third person. (1257a)
3. Facto ut des (I do that you may give)
General Rule:
4. Facto ut facias (I do that you may do)
Contracts are effective only to the contracting parties,
Do ut des is not an innominate contract anymore = their assigns, or heirs
barter or exchange Example:

A – B 1m. If B died = heirs of B will collect the 1m

A – B 1m. If A died = heirs of A will pay the 1m

*Assigns = if before either of them died, they assigned Any third person who induces another to violate his
to third persons the credit contract shall be liable for damages to the other
contracting party. (n)
Exception to the General Rule:
*even though he’s stranger to the contract, he will pay for
1. If the rights and obligations are not transmissible by damages
nature
Principle of Consensuality of Contracts
2. If not transmissible by stipulations
Article 1315
3. If not transmissible by provisions of law (ex. Contracts are perfected by mere consent, and from
partnership) that moment the parties are bound not only to the
*Not transmissible even to heirs and assigns fulfillment of what has been expressly stipulated but
also to all the consequences which, according to their
Stipulation Pour Autrui Requisites: nature, may be in keeping with good faith, usage and
law. (1258)
1. There must be a stipulation in favor of a third person
Meeting of minds is enough. Writing is not needed
2. The contracting parties must have clearly and
deliberately conferred a favor to the third person Article 1316 – exception to the principle of consensuality
of contract
3. The stipulation should be a part and not the whole of
the contract or the contract itself Real contracts, such as deposit, pledge and
commodatum, are not perfected until the delivery of
4. The third person must have communicated his the object of the obligation. (n)
acceptance to the obligor before its revocation by the
obligee or the original parties Real Contracts = COC + Delivery

5. Neither of the contracting parties bears the legal Unenforceable Contracts

representation or authorization of the third party for Article 1317
otherwise the rules on agency will apply
No one may contract in the name of another without
Article 1312 – exception to the principle of relativity of being authorized by the latter, or unless he has by law
contract a right to represent him.
In contracts creating real rights, third persons who A contract entered into in the name of another by
come into possession of the object of the contract one who has no authority or legal representation, or
are bound thereby, subject to the provisions of the who has acted beyond his powers, shall be
Mortgage Law and the Land Registration Laws. (n) unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been
*Pre-existing contract of mortgage. Third person will
executed, before it is revoked by the other contracting
respect the contract of mortgage between the parties.
party. (1259a)
Article 1313 – exception to the principle of relativity of
Example:
contract
Creditors are protected in cases of contracts intended to A owns a car. B sold A’s car to C without being authorize
defraud them. (n) = Unenforceable contract

Requisites for a person to contract in the name of

Example:
another:
A – B 1m (A can’t pay.)
1. He must be authorized (express or implied)
A donated his only property to C (to avoid securing it to
2. He must have by law, a right to represent him
his credit to B). to defraud B.
3. The contract must be subsequently RATIFIED
B is a defrauded creditor right to impugn (mangeelam) of
(express or implied)
A’s donation to C
4. He must act within his power
Article 1314 – exception to the principle of relativity of
contract
 1. There must be two or more parties

2. Parties must be capable or capacitated

3. There must be no vitiation of consent

4. There must be no conflict between what was

expressly declared and what was really intended

5. Intent must be declared properly

Chapter 2 – Essential requisites of Contracts

General Provisions Article 1320
Article 1318 An acceptance may be express or implied. (n)
There is no contract unless the following requisites
Express – written or oral
concur:
Implied – according to act or conduct of offeree
(1) Consent of the contracting parties;
Article 1321
(2) Object certain which is the subject matter of the
contract; The person making the offer may fix the time, place,
and manner of acceptance, all of which must be
(3) Cause of the obligation which is established. (1261) complied with. (n)
To have a valid contract = COC must be present
“Should be written”, “should be delivered on Dec.15”,
(consent, object, cause)
etc.
Classes of Elements of Contracts
Article 1322
1. Common – COC An offer made through an agent is accepted from the
2. Special time acceptance is communicated to him. (n)

- Real contracts – COC + Delivery Example: A – B a car. Offer was made through C (agent)

- Solemn or formal contracts – COC + Form Offer is accepted from the time the acceptance of B
is communicated to C
Section 1 – Consent
Article 1319 Article 1323

Consent is manifested by the meeting of the offer An offer becomes ineffective upon the death, civil
and the acceptance upon the thing and the cause interdiction, insanity, or insolvency of either party
which are to constitute the contract. The offer must be before acceptance is conveyed. (n)
certain and the acceptance absolute. A qualified
Article 1324
acceptance constitutes a counter-offer.
When the offerer has allowed the offeree a certain
Acceptance made by letter or telegram does not bind period to accept, the offer may be withdrawn at any
the offerer except from the time it came to his time before acceptance by communicating such
knowledge. The contract, in such a case, is presumed withdrawal, except when the option is founded upon a
to have been entered into in the place where the offer consideration, as something paid or promised. (n)
was made. (1262a)
A - B House for 1m. Gave B period of 10 days to accept.
Consent – meeting of the minds. There’s an offer and
acceptance After 5 days, A withdrew offer to sell his house =
withdrawal is valid
Offer must be certain (definite and seriously intended)
If B pays 1,000 as option money = A cannot withdraw
Acceptance must be absolute (yes or I agree. Counter anymore
offer is not absolute acceptance; tumawad)

*counter-offer extinguishes previous offer

Option Contract – period to accept
Requisites of Consent:
Option money – money paid or promised for the option
*not to be confused with earnest money – considered A contract where consent is given through mistake,
as partial payment violence, intimidation, undue influence, or fraud is
voidable. (1265a)

Characteristics of consent:

Consent must be intelligently given

Consent must be free and voluntary

Consent must be conscious or spontaneous

Voidable contracts are valid until annulled

Article 1325
Causes that vitiates consent:
Unless it appears otherwise, business advertisements
of things for sale are not definite offers, but mere 1. Error or mistake
invitations to make an offer. (n)
2. Violence or force
General Rule: Business advertisements are not offers
but mere invitations to make an offer 3. Intimidation or threat or duress

Exception: Unless appears otherwise 4. Undue influence

Definite offers – complete details of the thing 5. Fraud or deceit

Mere invitation – incomplete details of the thing Mistakes 1331 - 1334

Article 1331 – When does error or mistake vitiates
Article 1326 consent?
Advertisements for bidders are simply invitations to In order that mistake may invalidate consent, it should
make proposals, and the advertiser is not bound to refer to the substance of the thing which is the object
accept the highest or lowest bidder, unless the contrary of the contract, or to those conditions which have
appears. (n) principally moved one or both parties to enter into the
contract.
Article 1327
The following cannot give consent to a contract: Mistake as to the identity or qualifications of one of the
parties will vitiate consent only when such identity or
(1) Unemancipated minors; qualifications have been the principal cause of the
contract.
(2) Insane or demented persons, and deaf-mutes who do
not know how to write. (1263a) A simple mistake of account shall give rise to its
correction. (1266a)
*Minors = assumed that they still, cannot take care of
themselves and cannot make intelligible decisions Mistake or error – false notion of a thing or a fact
material to the contract
*Insane = unless contract is entered during lucid
intervals. Substantial mistake – the party would not have given
his consent if he had known the mistake
Article 1328
Mistake regarding object of the contracts
Contracts entered into during a lucid interval are
valid. Contracts agreed to in a state of drunkenness or A – B deliver 32k of gold necklace
during a hypnotic spell are voidable. (n)
Upon delivery, it turns out to be 16k gold
*State of drunkenness or hypnotic spell is considered
temporary insanity = B would not have given her consent if he knew it was
not 32k gold
Article 1329
Mistake regarding the condition of the contract
The incapacity declared in article 1327 is subject to the
modifications determined by law, and is understood to be A – B deliver a car thinking that B will pay him when she
without prejudice to special disqualifications established has the money.
in the laws. (1264)
B agrees thinking the car was a donation from A
Article 1330
Mistake regarding identity or qualifications Mutual error as to the legal effect of an agreement when
the real purpose of the parties is frustrated, may vitiate
A – B donated a car thinking that B is a lawyer (but is consent. (n) – can be annulled
really a lawyer)
Requisites for the application of Article 1334:
A – B donated a car thinking that B is his half-sister (but
is not really related to A) 1. Error must be mutual

Simple Mistake 2. Must be as to the legal effect of an agreement

A – B buy 10 pcs ballpen 6.50 each 3. Must frustrate the real purpose of the parties

A paid 75 pesos instead of 65

merely an error of computation = can be corrected

Article 1332 – Inability to read or understand Example:

When one of the parties is unable to read, or if the A and B entered into contract of mortgage, but executed
contract is in a language not understood by him, and a document for contract of sale believing that both has
mistake or fraud is alleged, the person enforcing the the same legal effects = voidable
contract must show that the terms thereof have been
fully explained to the former. (n) Anticresis – a written pledge and transfer from a debtor
to a creditor of possession of immovable property giving
General Rule: the creditor the right to the fruits (as rents) of the
When a person signs a document, the presumption is property which are to be deducted from the interest or
that he does so with full knowledge and understanding of principal of the debt compare pawn.
the contents of the same Violence or Intimidation 1335 - 1336
Exception: Article 1335

Article 1332 is an exception. When one of the parties is There is violence when in order to wrest consent,
unable to read or understand the language serious or irresistible force is employed.

Burden of proof – Offeror or the one enforcing the There is intimidation when one of the contracting
contract must show proof that he has fully explained the parties is compelled by a reasonable and well-grounded
terms and that there’s no proof fear of an imminent and grave evil upon his person or
property, or upon the person or property of his spouse,
Example: descendants or ascendants, to give his consent.

A – B sign a contract believing a contract of mortgage To determine the degree of intimidation, the age, sex and
but is really a deed of sale condition of the person shall be borne in mind.

A claims fraud or mistake. B has burden of proving that A threat to enforce one's claim through competent
she did not take advantage of A authority, if the claim is just or legal, does not vitiate
consent. (1267a) – kasi may legal rights ka naman
If B failed – the contract of deed of sale can be annulled towards the other party (ex. Kakasuhan kita pag di ka
by A (injured) nagbayad ng utang mo)
Article 1333 Violence – physical coercion (hitting a person every time
There is no mistake if the party alleging it knew the to sign a contract)
doubt, contingency or risk affecting the object of the
Intimidation – moral or mental coercion (pointing a gun to
contract. (n)
sign a contract)
Example:
Note: Both results to vitiated consent
A – B selling a land. B knew that there’s a litigation on
Requisites for VIOLENCE to vitiate consent:
the land (many claimants on owning the land). If after
you bought the land, A lost on litigation, B cannot ask for 1. Employment of serious or irresistible force
mistake and contract can’t be annulled. = valid and
binding 2. It must have been the reason why the contract
was entered into
Article 1334
Requisites for INTIMIDATION to vitiate consent:
 1. Reasonable and well-grounded fear – depends Requisites for Dolo Causante:
on the situation and considering age, sex, and
condition of the person (factors to determine the 1. The fraud must be material and serious
degree of intimidation) 2. The fraud must be employed by only one party
2. Of an imminent and grave evil 3. Deliberate intent to deceived (not good faith)
3. Upon his person, property or upon the person or 4. The other party must have rely on that untrue
property of his spouse, descendants, or statement, and must not be negligent
ascendants
Example: Concealment of illness for an insurance
4. It must have been the reason why the contract contract
was entered into
Sold ring saying that ring is diamond but is really just an
5. The threat must be of an unjust act, an ordinary glass = vitiated consent
actionable wrong
Article 1339 – Fraud by concealment
Article 1336
Failure to disclose facts, when there is a duty to reveal
Violence or intimidation shall annul the obligation, them, as when the parties are bound by confidential
although it may have been employed by a third person relations, constitutes fraud. (n) = voidable
who did not take part in the contract. (1268)
Best example: Partnership
Violence or intimidation by a third person that made you
enter into a contract = the contract can still be annulled. Article 1340
Provided all requisites are present
The usual exaggerations in trade, when the other party
Article 1337 – Undue Influence had an opportunity to know the facts, are not in
themselves fraudulent. (n)
There is undue influence when a person takes
improper advantage of his power over the will of another, Caveat Emptor = Let the buyer beware
depriving the latter of a reasonable freedom of choice.
Example: The soap will make your skin whitest in 2 days
The following circumstances shall be considered: the
Article 1341
confidential, family, spiritual and other relations between
the parties, or the fact that the person alleged to have A mere expression of an opinion does not signify fraud,
been unduly influenced was suffering from mental unless made by an expert and the other party has relied
weakness, or was ignorant or in financial distress. (n) on the former's special knowledge. (n)

Undue influence – influence that so overpowers the Requisites for an opinion to be fraud:
mind of a party as to prevent him from acting
understandingly or voluntarily (deprived freedom of 1. Must be made by an expert
choice) 2. The other contracting party has relied on the
expert’s opinion
Article 1338 – Fraud
There is fraud when, through insidious words or 3. The opinion turned out to be false or erroneous
machinations of one of the contracting parties, the other Therefore, an opinion of an expert is like a statement of
is induced to enter into a contract which, without them, fact, and if false, may be considered a fraud giving rise
he would not have agreed to. (1269) to annulment
Kinds of fraud: Example:
1. In the celebration of the contract A (farmer) sold to B a ring. Honestly believing that it’s a
a. Dolo Causante / Causal Fraud – In acquiring consent real diamond = no fraud because it’s just a mere
or perfection of the contract, annullment expression of opinion

b. Dolo Incidente / Incidental Fraud – In performance of Someone who is an expert on stones told the buyer that
the obligation, only pay damages the ring is diamond even if it’s just a stone. And the
buyer believed him because of his expertise. = fraud
2. In the performance of the contract
Article 1342
Causal Fraud -
Misrepresentation by a third person does not vitiate Article 1346
consent, unless such misrepresentation has created
An absolutely simulated or fictitious contract is void.
substantial mistake and the same is mutual. (n)
A relative simulation, when it does not prejudice a third
General Rule: person and is not intended for any purpose contrary to
law, morals, good customs, public order or public policy
A third person has no connection with a contract. A binds the parties to their real agreement. (n)
vitiation by him does not vitiate consent = no annulment
of contract If relative simulation = does not prejudice a third
person and is not intended for any purpose contrary to
Exception: law, morals, good customs, public order or public policy
= REAL AGREEMENT IS BINDING
If the misinterpretation has created substantial mistake
and mistake is mutual – affects both parties = contract Real agreement – valid if no one is prejudiced
can be annulled, connivance
Fake agreement – valid if prejudicial to the third person
Unless nagsabwatan yung 3rd person at isang party
Example of Absolute Simulation of Contract:
Article 1343 – misrepresentation in good faith
A and B enter into a contract of marriage for a JOKE
Misrepresentation made in good faith is not fraudulent
but may constitute error. (n) A and B executed a contract of sale for purposes of
deceiving other people without any intention to be bound
Misrepresentation is not intentional but made in good
by the contract (ex. kunware mabili yung isang product
faith (the person believed it to be true) = considered as
kahit hindi naman, para madeceive yung iba na bumili
mere mistake or error
rin)
Article 1344
Example of Relative Simulation of Contract:
In order that fraud may make a contract voidable, it
should be serious and should not have been employed A donated house to B
by both contracting parties. They executed deed of sale instead of deed of donation
Incidental fraud only obliges the person employing it to to avoid paying donor’s tax
pay damages. (1270) Section 2 – Object of Contracts
Requisites of Causal Fraud Article 1347

1. It should be serious All things which are not outside the commerce of men,
including future things, may be the object of a contract.
2. It should not have been employed by both All rights which are not intransmissible may also be the
contracting parties. They should not be in pari object of contracts.
delicto (di dapat parehas may kasalanan)
No contract may be entered into upon future inheritance
3. It should not have been known by the other except in cases expressly authorized by law.
contracting party
All services which are not contrary to law, morals, good
Article 1345 customs, public order or public policy may likewise be
the object of a contract. (1271a)
Simulation of a contract may be absolute or relative.
The former takes place when the parties do not intend to Object of a contract = subject matter
be bound at all; the latter, when the parties conceal their
true agreement. (n) Kinds of object of contract:

Simulation of contracts – act of deliberately deceiving 1. May be things (as in sale), rights (as in
others, by feigning or pretending by agreement, the assignment of credit), or services (as in agency)
appearance of a contract which is either non-existent or
concealed Object of Contract Requisites:

Absolute – when contract does not really exist and 1. Things or service must be within the commerce
parties do not intend to be bound at all of men (including future things)

Relative – when contract entered into by the parties is 2. Must be transmissible (napapasa. Ex. Right to
different from their true agreement / parties conceal their vote)
true agreement
 3. Must not be impossible (either physically or A promised to B to deliver a car = VOID
legally) – physically impossible can be absolute
or relative A promised to B his December 2020 harvest = NOT
VOID because DETERMINABLE
4. It must be in existence or capable of coming into
existence

5. It must be determinate or determinable without

the need of a new contract between the parties

Future Inheritance (outside commerce of man)

Cause of Contracts
General Rule: Article 1350

It cannot be an object of contract In onerous contracts the cause is understood to be, for
each contracting party, the prestation or promise of a
Ex. if your descendants are still alive, you cannot sell thing or service by the other; in remuneratory ones, the
their inheritance service or benefit which is remunerated; and in contracts
of pure beneficence, the mere liberality of the
Exception:
benefactor. (1274)
When expressly allowed by law
Cause (causa) – essential reason or purpose which
Note: Inheritance ceases to be future upon the death of contracting parties have in view at the time of entering
the descendent = can now be an object of the contract into the contract; consideration

Article 1348 Difference of cause from object is a matter of

viewpoint. Buy and sell (Cause for buyer is the land;
Impossible things or services cannot be the object of object is money. Cause for the seller is the money or
contracts. payment; object is land)
Must not be impossible (physical or legal) A cause of one is the object or subject matter of the
other
Physical Impossibility can be:

Absolute – no one can do it Classification of contracts according to cause:

Relative – impossible in some circumstance, and in Onerous – in this contract, the cause is parties are
some – possible reciprocally obligated to each other

Remuneratory – cause is to reward the service that had

Article 1349
been previously rendered by the party remunerated
The object of every contract must be determinate as
to its kind. The fact that the quantity is not determinate Gratuitous – cause is the liberality of the benefactor or
shall not be an obstacle to the existence of the contract, giver (pure beneficence, gusto niya tumulong), donation
provided it is possible to determine the same, without Article 1351
the need of a new contract between the parties. (1273)
The particular motives of the parties in entering into a
Object must be determinate or if not, at least be contract are different from the cause thereof. (n)
determinable without need of a new contract.
Motive – purely personal or private reason which a party
Because kulang yung essential requisites kaya siya has in entering into a contract
VOID CONTRACT
Cause distinguished from motive
Example:
Cause Motive
 Article 1355
Always the same May vary
Except in cases specified by law, lesion or inadequacy
Immediate or direct Remote or indirect
of cause shall not invalidate a contract, unless there has
reason reason
been fraud, mistake or undue influence. (n)
Always known to the May be unknown
contracting party Lesion – any damage caused by the fact that the price
is unjust or inadequate
An essential element of a Not an essential element
contract of a contract Injury suffered in consequence or inequality or situation
Illegality of cause affects Illegality of motive does
General rule:
validity of the contract not render the contract
void Lesion or inadequacy of cause does not of itself
Example: invalidate a contract.

A to buy gun from B to kill B. Unless:

Cause – gun Fraud, mistake, or undue diligence. Incases specified by

law = annulled
Motive – kill B

Article 1352
Chapter 3 – Form of Contracts
Contracts without cause, or with unlawful cause, Article 1356
produce no effect whatever. The cause is unlawful if it is
contrary to law, morals, good customs, public order or Contracts shall be obligatory, in whatever form they
public policy. (1275a) may have been entered into, provided all the essential
requisites for their validity are present. However, when
Requisites of Cause: the law requires that a contract be in some form in order
that it may be valid or enforceable, or that a contract be
1. Must be present at the time the contract is
proved in a certain way, that requirement is absolute and
entered into
indispensable. In such cases, the right of the parties
2. Must be lawful stated in the following article cannot be exercised.
(1278a)
3. Must be true or real
General Rule: Form is not required
Unlawful or Illegal cause = null and void
As long as all requisites for contract is present (COC –
Article 1353 – falsity of cause Consent, object, cause)
The statement of a false cause in contracts shall Exception:
render them void, if it should not be proved that they
were founded upon another cause which is true and When the law requires for the contract be in some form
lawful. (1276)
Form is important for:
False cause - Cause is valid but it’s not the real cause
1. For validity
So, if not proved that it’s founded on true and lawful
2. For enforceability
cause = VOID
3. For convenience
(para di ma-void, prove yung true agreement na lawful)
Examples of contracts where the law requires to be in
Article 1354
certain form for validity
Although the cause is not stated in the contract, it is
presumed that it exists and is lawful, unless the debtor 1. Donation of real property – public document
proves the contrary. 2. Donation of personal property if the value
exceeds 5,000 – donation and acceptance must
Necessary that cause must exists. But not necessary to
be in writing
state the cause in contract.
3. Sale of land through an agent – authority of
Example: In a check to pay someone or to bearer, cause
agent must be in writing
is not stated
 4. Stipulation to pay interest – in writing, otherwise, The principles of the general law on the reformation of
no interest instruments are hereby adopted insofar as they are not
in conflict with the provisions of this Code.
5. Contract of partnership – public document
Article 1361
Article 1357 – form for convenience of the parties
When a mutual mistake of the parties causes the failure
If the law requires a document or other special form, as of the instrument to disclose their real agreement, said
in the acts and contracts enumerated in the following instrument may be reformed.
article, the contracting parties may compel each other to
observe that form, once the contract has been perfected. Article 1362
This right may be exercised simultaneously with the
If one party was mistaken and the other acted
action upon the contract
fraudulently or inequitably in such a way that the
Article 1358 instrument does not show their true intention, the former
may ask for the reformation of the instrument.
The following must appear in a document:
Article 1363
1. Acts and contracts which have for their object the
creation, transmission, modification or extinguishment of When one party was mistaken and the other knew or
real rights over immovable property; sales of real believed that the instrument did not state their real
property or of an interest therein a governed by Articles agreement, but concealed that fact from the former, the
1403, No. 2, and 1405; instrument may be reformed.

2. The cession, repudiation or renunciation of hereditary

rights or of those of the conjugal partnership of gains;
Article 1364
3. The power to administer property, or any other power When through the ignorance, lack of skill, negligence or
which has for its object an act appearing or which should bad faith on the part of the person drafting the instrument
appear in a public document, or should prejudice a third or of the clerk or typist, the instrument does not express
person; the true intention of the parties, the courts may order that
4. The cession of actions or rights proceeding from an the instrument be reformed.
act appearing in a public document. Article 1365
All other contracts where the amount involved exceeds If two parties agree upon the mortgage or pledge of real
five hundred pesos must appear in writing, even a or personal property, but the instrument states that the
private one. But sales of goods, chattels or things in property is sold absolutely or with a right of repurchase,
action are governed by Articles, 1403, No. 2 and 1405. reformation of the instrument is proper.
(1280a)
Article 1366
Note: Law does not require accomplishment of certain
acts or contracts in a public instrument in order to There shall be no reformation in the following cases:
validate the act or contract. BUT only to INSURE (1) Simple donations inter vivos wherein no condition is
EFFICACY imposed;
Chapter 4 – Reformation of Instruments (2) Wills;
Article 1359
(3) When the real agreement is void.
When, there having been a meeting of the minds of the
parties to a contract, their true intention is not expressed Article 1367
in the instrument purporting to embody the agreement,
When one of the parties has brought an action to enforce
by reason of mistake, fraud, inequitable conduct or
the instrument, he cannot subsequently ask for its
accident, one of the parties may ask for the reformation
reformation.
of the instrument to the end that such true intention may
be expressed. Article 1368
If mistake, fraud, inequitable conduct, or accident has Reformation may be ordered at the instance of either
prevented a meeting of the minds of the parties, the party or his successors in interest, if the mistake was
proper remedy is not reformation of the instrument but mutual; otherwise, upon petition of the injured party, or
annulment of the contract. his heirs and assigns.

Article 1360 Article 1369

The procedure for the reformation of instrument shall be If some stipulation of any contract should admit of
governed by rules of court to be promulgated by the several meanings, it shall be understood as bearing that
Supreme Court import which is most adequate to render it effectual.
(1284)
Chapter 5
Interpretation of Contracts Article 1374
Article 1370 The various stipulations of a contract shall be
interpreted together, attributing to the doubtful ones
If the terms of a contract are clear and leave no
that sense which may result from all of them taken
doubt upon the intention of the contracting parties, the
jointly. (1285)
literal meaning of its stipulations shall control.
*Contract must be interpreted as a whole. Not just from
If the words appear to be contrary to the evident
particular words. Phrases, or clauses
intention of the parties, the latter shall prevail over the
former. (1281) Article 1375
Interpretation of a contract – determination of the Words which may have different significations shall
meaning of the terms or words used by the parties in be understood in that which is most in keeping with the
their written contract nature and object of the contract. (1286)

Process of ascertaining the intention of the parties Article 1376

from the written words.
The usage or custom of the place shall be borne in
GENERAL RULE: mind in the interpretation of the ambiguities of a contract,
and shall fill the omission of stipulations which are
when the terms of a contract are clear and ordinarily established. (1287)
unambiguous about the intention of the contracting
parties, the literal meaning of its stipulations shall *Rate of labor or prices will be dependent to the place
control. where it is performed

EXCEPTION RULE Article 1377

The interpretation of obscure words or stipulations in a
If the words appear to be contrary to the evident
contract shall not favor the party who caused the
intention of the parties
obscurity. (1288)
RULE:
Article 1378
In case of conflict between the terms of the contract and When it is absolutely impossible to settle doubts by
the evident intention of the contracting parties, which one the rules established in the preceding articles, and
must prevail? – The intention must/shall prevail the doubts refer to incidental circumstances of a
Article 1371 gratuitous contract, the least transmission of rights and
interests shall prevail. If the contract is onerous, the
In order to judge the intention of the contracting doubt shall be settled in favor of the greatest reciprocity
parties, their contemporaneous and subsequent acts of interests.
shall be principally considered. (1282)
If the doubts are cast upon the principal object of the
Acts of the parties shall be taken into consideration contract in such a way that it cannot be known what
in interpreting the intention of the contracting parties. may have been the intention or will of the parties, the
contract shall be null and void. (1289)

Article 1372 If the principal object is the one doubtful, cannot be

known = void or null
However general the terms of a contract may be, they
shall not be understood to comprehend things that Article 1379
are distinct and cases that are different from those upon The principles of interpretation stated in Rule 123 of the
which the parties intended to agree. (1283) Rules of Court shall likewise be observed in the
construction of contracts. (n)
“All” doesn’t mean everything. If one furniture is from a
different owner, it’s not to be included to what will be *if partly oral and partly written = written words are
given to the offeree. controlling
Article 1373