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CONTRACTS (CAUSE) FINALS ACJUCO 1

CAUSE The cause, for each contracting party, is the


prestation or promise of a thing or service by
CAUSE (causa) is the ESSENTIAL or more the other, while the object of the contract, on
PROXIMATE PURPOSE OR REASON which the other hand, is the thing or service itself.
the contracting parties have in view at the time
of entering into the contract. E.g. Contract of sale
For Vendor (Seller)
It is the “WHY OF THE CONTRACT”, the Cause – is the acquisition of the purchase
essential reason which moves the contracting price
parties to enter into the contract. Object - thing

For Vendee (Buyer)


Art. 1350. In onerous contracts the cause is Cause - acquisition of the thing
understood to be, for each contracting party, Object- price
the prestation or promise of a thing or
service by the other; in remuneratory ones, E.g. S sells a watch to B for P2,000. As far as
the service or benefit which is remunerated; S (vendor) is concerned, the subject matter or
and in contracts of pure beneficence, the object is the watch and the cause is the price.
mere liberality of the benefactor.
As regards B (vendee), the subject matter or
object is the price and the cause is the watch.
It is the Civil Code term for consideration in A school of thought, however, makes these
Anglo-American or common law. distinctions. The cause for S is the delivery of
the price and for B, the delivery of the watch.
CAUSE VS CONSIDERATION
But to both S and B, the subject matter of the
transaction is the watch.
Causa is merely the civil law term, while
consideration is the common law term.
1. ONEROUS
It is, however, undisputed that the causa in
civil law jurisdictions is broader in scope One the cause of which, for each
than consideration in Anglo-American contracting party, is the PRESTATION OR
jurisdictions. Many agreements which cannot PROMISE OF A THING OR SERVICE by
be supported in Anglo-American law for want the other. The parties are reciprocally
of consideration can be enforced under the obligated to each other.
broader doctrine of causa.
EXAMPLE:
Thus, a subsequent promise by X to reimburse
Y for a past service or benefit conferred on X
but not at the instance of X, would be sufficient  A logging company by contract
causa but would not constitute sufficient designated a certain agency as its
consideration in the sense of the common law. distributor to export logs to Korea
and Europe at the best market price
Similarly, mere liberality of the benefactor obtainable on condition that it would
constitutes causa in a contract of pure pay the latter a commission of 13%
beneficence but does not furnish sufficient of the gross value of the logs.
consideration under the English doctrine to
make the promise enforceable.  CAUSE OF LOGGING COMPANY-
is the distribution of its logs in the
CAUSE VS OBJECT areas agreed upon which the
agency undertook to accomplish.
CONTRACTS (CAUSE) FINALS ACJUCO 2

 CAUSE OF AGENCY - its CAUSE (for A) - the legal services


commitment to sell or export the rendered by B, although such services do
logs for onerous consideration. not constitute demandable debts.

a. The cause as to one party need not be 3. CONTRACTS OF PURE


adequate or of equivalent value with that BENEFICENCE
of the other.
Gratuitous or one the cause of which is
Exception: where the marked disparity the MERE LIBERALITY OF THE
in value may, in combination with other BENEFACTOR OR GIVER, such as
circumstances, indicate fraud, mistake, commodatum; pure donation; guaranty or
or undue influence. suretyship unless there is a stipulation to
the contrary (Art. 2048.), mortgage given
by a third person to secure an obligation of
A valuable consideration, however,
a debtor (see Art. 2085, last par.) unless a
small or nominal, if given or stipulated in consideration is paid for such mortgage.
good faith is, in the absence of fraud,
sufficient. EXAMPLE:

b. A purely moral obligation cannot A makes a pure donation of a certain


constitute a sufficient cause to support property to B in accordance with the
an onerous contract but a natural formalities prescribed by law,
obligation is a sufficient cause to CAUSE – mere liberality (causa
sustain such contract. liberalitatis) of the donor or benefactor.

c. In an accessory contract (like 1. The liberality of the benefactor is


mortgage), the cause is the very cause deemed causa only in those
contracts that are of pure
of the principal contract from which it
beneficence, that is to say,
receives its life and without which it contracts designed solely and
cannot exist as an independent contract. exclusively to procure the welfare
of the beneficiary, without any
2. REMUNERATORY OR intent of producing any satisfaction
REMUNERATIVE for the donor; contracts, in other
words, in which the idea of self-
One the cause of which is the SERVICE interest is totally absent on the
OR BENEFIT WHICH IS part of the transferor.
REMUNERATED. The purpose of the
contract is to reward the service that had In line with the above view, bonuses
been previously rendered by the party granted to employees to excite their
renumerated. zeal and efficiency, with consequent
benefit to the employer, do not
EXAMPLE: constitute donation having liberality
for a consideration.
A gives a certain property in accordance
with the formalities prescribed by law to his
lawyer friend, B, in remuneration for legal
services which the latter had rendered to
him freely in the past and such gift is duly
accepted.
CONTRACTS (CAUSE) FINALS ACJUCO 3

CAUSE VS MOTIVE
The motives which impel one to a sale or
ART. 1351. The particular motives of the purchase are not always the cause of the
parties in entering into a contract are contract as that term is understood in law. With
different from the cause thereof. one’s motives, the law cannot deal in actions
between the parties; while with the
consideration, the law is always concerned.
Motive is the purely personal or private reason
which a party has in entering into a contract. It 2. If the motive of S in selling his property is
is different from the cause of the contract. to defraud C, a creditor, the latter may ask
for the rescission of the sale.
CAUSE MOTIVE
1. Immediate or Remote or indirect 3. W (wife) died. To preclude her heirs from
direct reason reason inheriting and to avoid payment of estate
2. Always known to Motive may be taxes, H (spouse) sold the conjugal
the other unknown property to B.
contracting party
3. Essential element Not essential The sale cannot prejudice the inheritance right
of a contract of the heirs to their share of the conjugal
4. Illegality of the Illegality of one’s property. Here, the illegal motive of H
cause affects the motive does not predetermined the purpose of the contract of
validity of a render the contract sale rendering it null and void.
contract void
4. Where a married man of mature years
In other words, cause is the essential reason donated a parcel of land to a girl of sixteen
which moves the contracting parties to subject to the condition that the latter shall
enter into it and justifies the creation of an cohabit with him, and such condition is
obligation through their will. While cause is accepted.
the essential reason for the contract, motive is
the particular reason of a contracting party It is clear that the donation is conditioned
which does not affect the other party. upon the attainment of the motive of the
donor; in other words, it predetermines the
WHEN MOTIVE REGARDED AS CAUSE purpose of the contract. Thus considered,
(Purpose is to defraud creditor) the conveyance is clearly predicated upon
an illegal causa. Consequently, it is void.
As a general principle, the motive or particular Therefore, under what is now Art. 1412 of
purpose of a party in entering into a contract the New Civil Code, there can be no
does not affect the validity nor existence of the recovery of what has already been
contract. delivered.

Motive may be considered the cause in a CASE: LIGUEZ VS CA


contract WHEN SUCH MOTIVE
PREDETERMINES THE CAUSE OF THE Donation was impelled by donor’s desire to
CONTRACT. cohabit with donee.

Examples: Facts: R donated a parcel of land to E. R was


impelled to make the donation because of his
1. S sells his house and lot to B for One (1) desire for cohabiting with E. E claimed that the
million pesos. For S, the cause or cause of the contract was the liberality of R
consideration is the One (1) million pesos. and that the motive of E (i.e., to cohabit with
But his motive or private reason may be to her) was different from such cause and,
use the money in business or to buy therefore, the donation was valid.
another house.
CONTRACTS (CAUSE) FINALS ACJUCO 4

Issue: Is this contention tenable? DEFECTIVE CAUSES AND


EFFECTS:
Held: No. The motive may be regarded as the
cause when it predetermines the cause of the ABSENCE OF CAUSE OR
contract. It was not disputed that R would not
UNLAWFUL CAUSE
have conveyed the property in question had
he known that E would refuse to cohabit with ART. 1352. Contracts without cause, or with
him; so that cohabitation was an implied unlawful cause, produce no effect whatever.
condition of the donation, and being unlawful, The cause is unlawful if it is contrary to law,
necessarily tainted the donation itself. morals, good customs, public order or public
policy.
The contract was onerous in character. It was
clearly predicated upon an illicit cause. REQUISITES OF CAUSE:

PRESUMPTION: EXISTENCE AND 1. It must exist at the time of the


celebration of the contract.
LAWFULLNESS OF CAUSE
2. It must be licit or lawful; and
ART. 1354. Although the cause is not 3. It must be true or real.
stated in the contract, it is presumed that it GENERAL RULE: Contract has no
exists and is lawful, unless the debtor cause/cause should be illicit or unlawful =
proves the contrary. SHALL NOT PRODUCE ANY EFFECT AND
IT IS INEXISTENT OR VOID FROM THE
BEGINNING.
It is not necessary that the cause be expressly
stated in the contract. The presumption is that
the cause exists and is lawful unless the
debtor proves the contrary. This presumption EFFECT OF ABSENCE OF CAUSE
is in accord with the natural order of things. Contracts without cause CONFER NO RIGHT
Ordinarily, a person will not part with his AND PRODUCE NO LEGAL EFFECT
property unless there is a consideration. It is WHATEVER.
only prima facie and must yield to contrary Thus, a contract which is absolutely simulated
evidence. or fictitious is inexistent and void. (Arts.
PRESUMPTIOM: There is a consideration. 1346, 1409[3].) Where there is, in fact, no
consideration, the statement of one in the
To overcome the presumption, the alleged contract will not suffice to bring it under the rule
lack of consideration must be shown by of Article 1353 as stating a false consideration.
preponderance of evidence.
EXAMPLES:
EXAMPLE:
A contract of sale, for example, is void if the
D issued in favor of C a promissory note which price is simulated, but the act may be shown
recites: to have been in reality a donation or some
other act or contract.
“Thirty days after date, I promise to pay C or
order the amount of P1,000.00.” Signed “D.” If the purchase price in a contract of sale was
Although the promissory note does not never in fact paid by the purchaser or vendee
mention the consideration, the law presumes to the vendor, the contract is inexistent for all
purposes for lack of a cause or consideration.
that D must have received a consideration for
the debt and that the same is lawful, and Except: the purchaser or vendee failed to fully
furthermore, that it is sufficient or adequate. pay for the property, even if there is a
CONTRACTS (CAUSE) FINALS ACJUCO 5

stipulation in the contract of sale that full STATEMENT OF FALSE CAUSE


payment shall be made at the time of the
celebration thereof. REASON: There is a ART. 1353. The statement of a false cause
consideration. in contracts shall render them void, if it
should not be proved that they were
founded upon another cause which is true
1. Grant of right of first refusal. — It is
and lawful.
not correct to say that there is no
consideration for the grant of the right The statement of a false cause in contracts
of first refusal if such grant is embodied SHALL RENDER THEM VOID.
in the same contract of lease.
EXCEPTION: if it should not be proved that
EFFECT OF UNLAWFUL CAUSE they were founded upon another cause which
The cause is unlawful when it is contrary to is true and lawful.
law, morals, good customs, public order or Thus, where the deed of sale expressly states
public policy. According to the same article, if that the purchase price has been paid when in
a contract has an unlawful cause, IT SHALL fact it has never been paid, it is evident that
NOT PRODUCE ANY EFFECT the contract of sale is invalid in accordance
WHATSOEVER; in other words IT IS VOID with the general rule announced in Art. 1353
FROM THE VERY BEGINNING. and confirmed by Art. 1409, No. 2, which
EXAMPLES: declares as inexistent those contracts which
are absolutely simulated or fictitious.
(1) Contract affecting the course of a
criminal prosecution is invalid, because A false cause may be erroneous or
such a contract would be manifestly simulated.
contrary to public policy and the due ERRONEOUS - produces the inexistence of a
administration of justice. contract. If the cause is false, the contract is
rendered void because the same actually
(2) A promise of marriage based upon does not exist.
carnal connection is founded on an
unlawful cause and, therefore, void and SIMULATED - The second does not always
no action can be maintained by the produce this effect, because it may happen
woman against the man therefor. that the hidden but true cause is sufficient to
support the contract. If the parties can show
(3) A proscription against sale of property that there is another cause and that said
between spouses applies even to cause is true and lawful, then the parties
common law relationships. shall be bound by their true agreement.

EFFECT OF FAILURE OF CAUSE EXAMPLES:

GENERAL RULE: is not a ground for relief (1) X promised to give to Y P1,000.00 as
and from failure of cause which does not payment for past services allegedly rendered
render a contract void. by Y which in truth and in fact have not been
rendered; or for a carabao which unknown to
Remedy: Demand the fulfillment or X is already dead.
cancellation of the obligation under an existing
contract. Here, the cause for X, the service remunerated
or the promise of Y to sell the carabao, is
erroneous as it is based upon facts believed to
be existing, but really inexistent.
CONTRACTS (CAUSE) FINALS ACJUCO 6

Ex. Contractof sale, wherein parties stipulate considering the value of the things at the time
lower price, for lower interest collection. But they were adjudicated.”
their real intention is true and lawful. It is a
“Art. 1470. Gross inadequacy of price does
valid contract.
not affect a contract of sale, except as it may
indicate a defect in the consent, or that the
parties really intended a donation or some
INADEQUACY OF CAUSE/LESION other act or contract.”
ART. 1355. Except in cases specified by “Art. 1539. x x x .’’ If the sale of real estate
law, lesion or inadequacy of cause shall not should be made with a statement of its area,
invalidate a contract, unless there has been at the rate of a certain price for a unit of
fraud, mistake or undue influence. measure or number, the vendor shall be
obliged to deliver to the vendee, if the latter
should demand it, all that may have been
Lesion is any damage caused by the fact stated in the contract; but should this be not
that the price is unjust or inadequate. It is the possible, the vendee may choose between a
injury suffered in consequence of inequality of proportional reduction of the price and the
situation, by one party who does not receive rescission of the contract, provided, that in the
the full equivalent for what he gives in a latter case, the lack in the area be not less than
commutative contract, like a sale. one-tenth of that stated.
GENERAL RULE — Lesion or inadequacy of The same shall be done, even when the area
cause (e.g., price of thing sold) does not of is the same, if any part of the immovable is not
itself invalidate a contract. of the quality specified in the contract.
The general rule is that a party to a contract The rescission, in this case, shall only take
will not be relieved from his obligation under it place at the will of the vendee, when the
by the mere fact that the contract may turn out inferior value of the thing sold exceeds one
to be financially disadvantageous to him. tenth of the price agreed upon.
REASON: All men are presumed to be sane Nevertheless, if the vendee would not have
and normal and subject to be moved by bought the immovable had he known of its
substantially the same motives. smaller area or inferior quality, he may rescind
the sale.’’
EXCEPTIONS — Lesion will invalidate a
contract — “Art. 1542. In the sale of real estate, made for
(a) When there has been fraud, mistake, or a lump sum and not at the rate of a certain sum
undue influence; and for a unit of measure or number, there shall be
no increase or decrease of the price, although
(b) In cases specified by law. (Art. 1381.) there be a greater or less or area or number
than that stated in the contract.
The rule in Article 1355 “is a general principle
of modern law. The same rule shall be applied when two or
more immovable are sold for a single price; but
Related provisions. — The following if, besides mentioning the boundaries, which is
provisions of law are pertinent: indispensable in every conveyance of real
estate, its area or number should be
“Art. 1098. A partition, judicial or extrajudicial,
designated in the contract, the vendor shall be
may also be rescinded on account of lesion,
bound to deliver all that is included within said
when any one of the co-heirs received
boundaries, even when it exceeds the area or
things whose value is less, by at least one-
number specified in the contract; and, should
fourth, than the share to which he is entitled,
he not be able to do so, he shall suffer a
CONTRACTS (CAUSE) FINALS ACJUCO 7

reduction in the price, in proportion to what is


lacking in the area or number, unless the
contract is rescinded because the vendee
does not accede to the failure to deliver what
has been stipulated.’’
“Art. 1602. The contract shall be presumed to
be an equitable mortgage in any of the
following cases:
(1) When the price of a sale with right to
repurchase is unusually inadequate. x
x x.’’
CONTRACTS (CAUSE) FINALS ACJUCO 8

FORM OF CONTRACTS CLASSIFICATION OF CONTRACTS


ACCORDING TO FORM
ART. 1356. Contracts shall be obligatory,
in whatever form they may have been They are:
entered into, provided all the essential
(1) Informal or common contract or that
requisites for their validity are present.
which may be entered into in whatever
However, when the law requires that a
form, provided, all the essential
contract be in some form in order that it
requisites for their validity are present.
may be valid or enforceable, or that a
(Art. 1356.) This refers only to
contract be proved in a certain way, that
consensual contracts (Art. 1356.), such
requirement is absolute and indispensable.
as the contract of sale. An informal
In such cases, the right of the parties
contract may be oral or written; and
stated in the following article cannot be
exercised.
(2) Formal or solemn contract or that
CONTRACT may be: which is required by law for its efficacy
to be in a certain specified form.
FORMS:
a) Parol or oral, GENERAL RULE: Contracts are BINDING
b) In writing and, therefore, ENFORCEABLE reciprocally
c) Partly oral and partly in writing. If in writing, by the contracting parties, whatever may be
it may be in a public or a private instrument. the form in which the contract has been
entered into provided all the three essential
- Need not be contained in a single requisites (consent, object, and cause), for
writing. It may be collected from their validity are present.
different writings which do not confl ict
with each other and which when The form in which a contract is executed has
connected, show the parties, subject no effect, as a general rule, upon its obligatory
matter, terms and consideration, as in force, provided all of the essential requisites
contracts entered into by for its validity are present.
correspondence. Contracts of partnership, of agency, and of
lease of services, although executed verbally,
- May be encompassed in several are obligatory as far as the contracting parties
instruments even though every are concerned. Also, verbal extrajudicial
instrument is not signed by the parties partition of property is valid and binding among
since it is sufficient if the unsigned the parties thereto.
instruments are clearly identified or
referred to and made part of the signed In the matter of formalities, the contractual
instrument or instruments. system of the Civil Code still follows that of the
Spanish Civil Code of 1889 of upholding the
- Similarly, a written agreement of which spirit and intent of the parties over
there are two copies, one signed by formalities. This is plain from Articles 1315
each of the parties is binding on both to and 1356.
the same extent as though there had EXCEPTIONS:
been only one copy of the agreement
and both had signed. (1) When the law requires that the contract
must be in a certain form in order to be
valid;
CONTRACTS (CAUSE) FINALS ACJUCO 9

(2) When the law requires that the contract 1. FORMALITIES FOR VALIDITY
must be in a certain form in order to be
enforceable. There are certain contracts for which the law
prescribes certain forms for their validity.
REASONS FOR EXCEPTIONS:
These contracts maybe classified as follows:
According to the Code Commission, Article
1356 combines the “spiritual system” of the old (1) THOSE WHICH MUST APPEAR IN
Civil Code and the principles of the Anglo- WRITING;
American law as manifested in the Statute of (2) THOSE WHICH MUST APPEAR IN A
Frauds. The foundation is still the “spiritual PUBLIC DOCUMENT; AND
system” so that in general, the contracting (3) THOSE WHICH MUST BE
parties may, under Article 1357, compel REGISTERED.
each other to comply with the form
required by law. CONTRACTS W/C MUST APPEAR IN
The requirement that certain contracts be in WRITING are as follows:
certain forms to be valid or enforceable is (1) Donations of personal property whose
calculated to avoid litigation. Oral contracts value exceeds five thousand pesos.
frequently lead to fraud in the fulfillment of According to Art. 748 of the Code, the
obligations or to false testimony. So long as donation and the acceptance shall be
the possibility of dishonesty exists in made in writing; otherwise, it shall be void.
contractual relations, the “spiritual system”
cannot be adopted in an unqualified manner. (2) Sale of a piece of land or any interest
If the form required for validity or enforceability therein through an agent. According to
of a contract is not observed, the parties Art. 1874 of the Code, the authority of the
cannot avail of the right granted under Article latter shall be in writing; otherwise, the sale
1357. shall be void.

(3) Agreements regarding payment of


FORM OF CONTRACTS REQUIRED BY interest in contracts of loan. According
LAW to Art. 1956 of the Code, no interest shall
be due unless it has been expressly
1) Those which are necessary for the stipulated in writing. The validity of the
convenience of the contracting parties or contract of loan, however, is not affected.
for the efficacy of the contract; (Art 1356
to 1358) (4) According to Art. 2134 of the Code, in
contracts of antichresis, the amount of
2) Those which are necessary for the validity
the principal and of the interest shall be
of the contract; (Articles 748, 749, 1874,
specified in writing; otherwise, the contract
2134, 1771, 1773)
shall be void.
3) Those which are necessary for the
enforceability of the contract (Statute of
Contracts which must appear in a PUBLIC
Frauds).
DOCUMENT are as follows:
(1) Donations of immovable property.
According to Art. 749 of the Code, the
donation must be made in a public
document. The acceptance, on the other
hand, may be made in the same deed of
CONTRACTS (CAUSE) FINALS ACJUCO 10

donation or in a separate public 2. FORMALITIES OF EFFICACY/


document. If the acceptance is made in TO MAKE IT EFFECTIVE AS TO
a separate public document, the donor
THIRD PARTIES
shall be notified thereof in an authentic
form, and this step shall be noted in both Art. 1357. If the law requires a document or
instruments. other special form, as in the acts and
contracts enumerated in the following
Noncompliance with any of these article, the contracting parties may compel
formalities shall render the donation each other to observe that form, once the
void. contract has been perfected. This right may
be exercised simultaneously with the action
(2) Partnerships where immovable upon the contract.
property or real rights are contributed
to the common fund. According to Arts.
1771 and 1773 of the Code, in a General rule: Contracts shall be obligatory in
contract of partnership where immovable whatever form they may have been entered
property or real rights are contributed to into.
the common fund, it is necessary that the
contract must appear in a public IN ORDER TO INSURE THEIR EFFICACY
instrument and that there must be an AND TO PROTECT THE INTERESTS OF
inventory of the immovable property or THE CONTRACTING PARTIES AS WELL
real rights, signed by the partners, and AS THAT OF THIRD PERSONS.
attached to the public instrument; The Civil Code, recognizing this necessity,
otherwise, the contract is void. enumerates in Art. 1358 the different classes
of contracts which must appear either in a
CONTRACTS WHICH MUST BE public or in a private document, and grants in
REGISTERED are as follows: Art. 1357 a coercive power to the
contracting parties by which they can
(1) Chattel mortgages. According to Art. reciprocally compel the observance of the
2140 of the Code, by a chattel required form.
mortgage, personal property is
recorded in the Chattel Mortgage 1. Arts. 1357 and 1358 do not require the
Register as a security for the execution of the contract either in a public
performance of an obligation. or in a private document in order to validate
or enforce it but only to insure its
If the movable, instead of being efficacy, in other words, the form required
recorded, is delivered to the creditor or is neither for validity nor enforceability but
a third person, the contract is a pledge for the convenience of the contracting
and not a chattel mortgage. parties, so that after its existence has been
admitted, the party bound may be
(2) Sales or transfers of large cattle. compelled to execute the necessary
According to the Cattle Registration Act document.
(Act No. 1147, Sec. 22), no sale or 2. Even where the contract has not been
transfer of large cattle shall be valid reduced to the required form, IT IS STILL
unless it is duly registered and a VALID AND BINDING AS FAR AS THE
certificate of transfer is secured. CONTRACTING PARTIES ARE
CONCERNED. Consequently, both
articles presuppose the existence of a
contract which is valid and enforceable.
CONTRACTS (CAUSE) FINALS ACJUCO 11

3. From the moment one of the contracting In certain cases, a certain form (e.g., public
parties invokes the provisions of Arts. 1357 instrument) is required for the convenience of
and 1358 by means of a proper action, the the parties in order that the contract may be
effect is to place the existence of the registered in the proper registry to make
contract in issue, which must be resolved effective, as against third persons, the right
by the ordinary rules of evidence. acquired under such contract. Non-
compliance with the required form would
4. Art. 1357 does not require that the action
not adversely affect the validity nor
to compel the execution of the necessary
enforceability of the contract between the
document must precede the action upon
parties themselves.
the contract. As a matter of fact, both
actions may be exercised simultaneously. Art. 1358. The following must appear in a
5. However, although the provisions of Art. public document:
1357, in connection with those of Art. 1358, (1) Acts and contracts which have for their
do not operate against the validity of the object the creation, transmission, modification
contract nor the validity of the acts or extinguishment of real rights over
voluntarily performed by the parties for the immovable property; sales of real property or
fulfillment thereof, yet from the moment of an interest therein are governed by Articles
when any of the contracting parties 1403, No. 2 and 1405;
invokes said provisions, it is evident
(2) The cession, repudiation or renunciation of
that under them the execution of the
hereditary rights or of those of the conjugal
required document must precede the
partnership of gains;
determination of the other obligations
derived from the contract. (3) The power to administer property, or any
other power which has for its object an act
EXAMPLE: appearing or which should appear in a public
If the contract of sale is in private writing, then document, or should prejudice a third person;
it is valid and binding, although it is still (4) The cession of actions or rights proceeding
executory, but only as between the parties and from an act appearing in a public document.
not as against third persons without notice until
the sale is registered in the Registry of All other contracts where the amount involved
Property. exceeds five hundred pesos must appear in
writing, even a private one. But sales of
If B is the buyer, he has a right to compel S to goods, chattels or things in action are
put the contract in a public instrument so that governed by Articles 1403, No. 2, and 1405.
it can be registered to affect third persons
notwithstanding the absence of express The contracts covered by this article are valid
agreement between them to that effect. For a and enforceable though not embodied in a
sale of real property or of an interest therein to public document or instrument or in writing.
be enforceable under the Statute of Frauds, it
is enough that it be in writing. It need not be The public document is required only for the
notarized. convenience and greater protection of the
parties and REGISTRATION IS NEEDED
Inasmuch as the contract is both valid and
ONLY TO MAKE THE CONTRACT
enforceable, the execution of a public
EFFECTIVE AS AGAINST THIRD
instrument becomes a mere matter of form PERSONS.
and convenience.
Formal requirements are, therefore, for the
FORM FOR THE CONVENIENCE OF THE
benefit of third parties for the purpose of
PARTIES
informing as well as binding them. Non-
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compliance therewith does not adversely requires to be proved by some writing


affect the validity of the contract nor the (memorandum) of its terms, as in those
contractual rights and obligations of the parties covered by the Statute of Frauds, now Art.
thereunder.
1403(2) of the Civil Code. Their existence not
CASE: DAUDEN-HERNAEZ VS. DE LOS being probable by mere oral testimony (unless
ANGELES wholly or partly executed), these contracts are
exceptional in requiring a writing embodying
Facts: Marlene Dauden, a movie actress, filed
the terms thereof for their enforceability by
a complaint against the Hollywood Far East
action in court. The contract sued upon by
Productions, Inc. and its President and
petitioner herein does not come under either
General Manager, Ramon Valenzuela, to
exception. It is true that it appears included in
recover P14, 700 representing the balance of
the last clause of Art. 1358, but it nowhere
her compensation as leading actress in two
provides that the absence of written form in
motion pictures produced by the defendant
this case will make the agreement invalid or
company.
unenforceable.
Upon motion of defendants, the lower court
On the contrary, Art. 1357 clearly indicates
dismissed the complaint because “the claim of
that contracts covered by Art. 1358 are binding
plaintiff was not evidenced by any written
and enforceable by action despite the absence
document, either public or private’’ in violation
of writing.
of Art. 1358 of the New Civil Code.
Wherefore, the order dismissing the
As a last recourse, plaintiff appealed to the
complaint is set aside, and the case is
Supreme Court on the ground that the court
ordered remanded to the court of origin for
below had abused its discretion.
further proceedings not at variance with
Held: We hold that there was abuse, since the this decision.
ruling herein contested betrays a basic and
lamentable misunderstanding of the role of the
3. FOR PURPOSES OF PROVING
written form in contracts, as ordained in the EXISTENCE OF
present Civil Code. CONTRACT/FORMALITIES OF
In the matter of formalities, the contractual
ENFORCEABILITY
system of our Civil Code still follows that of the In the cases of contracts covered by the
Spanish Civil Code of 1889 and of the Statute of Frauds, the law requires that they
“Ordenamiento de Alcala” of upholding the be in writing subscribed by the party charged
spirit and intent of the parties over formalities; or by his agent. (Art. 1403[2].)
hence, in general, contracts are valid and
binding from their perfection regardless of If the contract is not in writing, THE
form, whether they be oral or written. This is CONTRACT IS VALID (assuming all the
plain from Articles 1315 and 1356 of the essential elements are present) but, upon the
present Civil Code. objection of a party, it cannot be proved and,
therefore, IT CANNOT BE ENFORCED
To this general rule, the Code admits two UNLESS IT IS RATIFIED. (Art. 1405.)
exceptions, to wit: (1) Contracts for which the
law itself requires that they be in some There are also certain contracts which are
unenforceable by action, unless they are in
particular form in order to make them valid and
writing and properly subscribed, or unless they
enforceable (the so called solemn contracts).
are evidenced by some note or memorandum,
Examples of these are the contracts or which must also be in writing and properly
agreements contemplated in Arts. 748, 749, subscribed. These contracts are governed by
1744, 1773, 1874, 1956, and 2134 of the the Statute of Frauds
present Civil Code. (2) Contracts that the law
CONTRACTS (CAUSE) FINALS ACJUCO 13

EXAMPLE: (2) Their true intention is not expressed in the


instrument;
Suppose the contract is a sale of real property
but it is entered into orally. The contract is valid (3) Such failure to express their true intention
but it is unenforceable because the law is due to mistake, fraud, inequitable conduct or
requires that it be in writing to be enforceable. accident.
REASON: Equity orders the reformation of an
instrument in order that the true intention of the
REFORMATION OF INSTRUMENTS contracting parties may be expressed. The
rationale of the doctrine is that it would be
ART. 1359. When, there having been a
unjust and inequitable to allow the
meeting of the minds of the parties to a
enforcement of a written instrument which
contract, their true intention is not expressed
does not reflect or disclose the real meeting of
in the instrument purporting to embody the
the minds of the parties.
agreement, by reason of mistake, fraud,
inequitable conduct or accident, one of the ANNULMENT VS REFORMATION
parties may ask for the reformation of the
Reformation of Instrument- there is
instrument to the end that such true intention
presupposes valid contract in which there has
may be expressed.
been meeting of minds.
If mistake, fraud, inequitable conduct, or
Annulment of Contract – a defective contract
accident has prevented a meeting of the
in which there has been no meeting of the
minds of the parties, the proper remedy is
minds because consent of one or both of the
not reformation of the instrument but
contracting parties has been vitiated (mistake,
annulment of the contract.
fraud, inequitable conduct, accident).
Examples:
REFORMATION - Reformation is that remedy
1. Where the vendee has been led to
by means of which a written instrument is enter into a contract of sale through
made/construed/amended or rectified so as to fraud or misrepresentation on the part
express or conform to the real agreement or of the vendor or in the mistaken belief,
intention of the parties when by reason of that, as stated in the deed, the property
mistake, fraud, inequitable conduct, or he was buying was unregistered land, it
accident, the instrument fails to express such is evident that the proper remedy is not
agreement or intention.
reformation of the deed of sale but
REFORMATION OF INSTRUMENTS - When annulment of the contract.
the true intention of the parties to a perfected
and valid contract are not expressed in the 2. S sold his land to B. It was agreed that
instrument purporting to embody their the sale will include all the
agreement by reason of mistake, fraud, improvements. However, the contract
inequitable conduct or accident, one of the as signed by the parties, states that the
parties may ask for the reformation of the land is being sold, excluding the
instrument so that such true intention may be improvements thereon.
expressed.
In this case, the remedy is reformation
REQUISITES: because there has been a meeting of the
minds. But if S was selling his land “excluding”
(1) There must be a meeting of the minds of the improvements and B was buying the land
the contracting parties; “including” the improvements, then there has
been no meeting of the minds and the remedy,
CONTRACTS (CAUSE) FINALS ACJUCO 14

therefore, is annulment. Reformation cannot (b) The failure of the written agreement to
be the remedy because, either way, it would express the true intent and agreement of the
not make the instrument express the real parties thereto;
intention of both parties.
(c) The validity of the written agreement; or
NOTE: Both parties must have executed a
(d) The existence of other terms agreed to by
writing that does not reflect their actual
the parties or their successors in interest after
agreement. Reformation is thus not available
the execution of the written agreement.
where no writing exists, or a writing exists, but
the parties do not intend it to express their final
Art. 1360. The principles of the general
agreement, or no attempt is made to show any
law on the reformation of instruments are
vice of consent therein.
hereby adopted insofar as they are not in
ULTIMATE FACTS TO BE ALLEGED AND conflict with the provisions of this Code.
PROVED IN ACTION FOR REFORMATION. Art. 1361. When a mutual mistake of the
(1) In an action for the reformation of an parties causes the failure of the
instrument, the complaint must allege the instrument to disclose their real
true agreement or intention of the parties agreement, said instrument may be
and that the instrument to be reformed reformed.
does not express such agreement or Art. 1362. If one party was mistaken and
intention. In the absence of such the other acted fraudulently or inequitably
allegation, there is no cause of action in such a way that the instrument does
stated. not show their true intention, the former
(2) The onus probandi is upon the party who may ask for the reformation of the
insists that the contract should be instrument.
reformed because of its failure to express
Art. 1363. When one party was mistaken
the true intention of the parties because and the other knew or believed that the
the presumption is that an instrument instrument did not state their real
sets out the true agreement of the agreement, but concealed that fact from
parties. the former, the instrument may be
reformed.
ADMISSIBILITY OF PAROL EVIDENCE TO Art. 1364. When through the ignorance,
SHOW TRUE INTENT lack of skill, negligence or bad faith on the
part of the person drafting the instrument
As a general rule, the court may not allow the
or of the clerk or typist, the instrument
introduction of parol evidence to show the real
does not express the true intention of the
agreement of the parties. Whatever is not
parties, the courts may order that the
found in the text of the agreement should thus instrument be reformed.
be construed as excluded, waived, or
abandoned. Art. 1365. If two parties agree upon the
mortgage or pledge of real or personal
However, a party may present evidence to property, but the instrument states that
modify, explain or add to the terms of the the property is sold absolutely or with a
written agreement if he puts in issue in his right of repurchase, reformation of the
pleading: instrument is proper.
(a) An intrinsic ambiguity, mistake or
imperfection in the written agreement;
CONTRACTS (CAUSE) FINALS ACJUCO 15

 Mutual mistake as basis for reformation WHEN REFORMATION IS NOT


(Art 1360) ALLOWED
To justify reformation under this article, Art. 1366. There shall be no reformation in
the following requisites must concur: the following cases:
(1) The mistake must be of fact (see Art. (1) Simple donations inter vivos wherein no
1331.), for if it is one of law, the remedy condition is imposed;
is annulment (see Art. 1334.);
(2) Such mistake must be proved by (2) Wills;
clear and convincing evidence; (3) When the real agreement is void
(3) The mistake must be mutual, that is,
common to both parties to the (1) Simple donations inter vivos where no
instrument; and condition is imposed. — Donation is an
(4) The mistake must cause the failure act of liberality whereby a person disposes
of the instrument to express their true gratuitously of a thing or right in favor of
intention. another, who accepts it. Lifetime, it is a
donation inter vivos. It is distinguished from
 The right to ask for reformation is donation mortis causa in that this kind of
granted only to the party who was donation takes effect after the donor’s
mistaken in good faith. Here, the death.
mistake is not mutual (Art 1362)
If in the deed of donation, a mistake or
 The remedy of reformation may be defect has been committed, it is a mere
availed of only by the party who acted failure in a bounty which, as the donor was
in good faith. The concealment of the not bound to make, he is not bound to
mistake by the other party constitutes correct. Of course, the donor may ask for
fraud (Art 1363) the reformation of a deed of donation.

 Ignorance, etc. on the part of third (2) Wills. — A will is an act whereby a person
person, neither party is responsible for is permitted with the formalities prescribed
the mistake. Hence, either party may by law to control to a certain degree the
ask for reformation (Art 1364) disposition of his estate, to take effect after
his death.
 In mortgage or pledge stated as a sale, Like a donation, the making of a will is a strictly
the reformation of the instrument is personal and free act which cannot be left to
proper, otherwise, the true intention of the discretion of a third person; hence, upon
the parties would be frustrated. Such the death of the testator, the right to
true intention must prevail for the reformation is lost. Furthermore, a will may be
contract must be complied with in good revoked by the testator any time before his
faith (Art 1365) death and this right is not subject to waiver or
restriction.
(3) Where the real agreement is void. — If
the real agreement is void, there is nothing
to reform. Reformation would be useless
because the real agreement being void, it
is unenforceable.
CONTRACTS (CAUSE) FINALS ACJUCO 16

IMPLIED RATIFICATION promulgated the procedure for the reformation


of instruments. (Sec. 7, Rule 130, Rules of
Art. 1367. When one of the parties has Court.)
brought an action to enforce the instrument,
As a general rule, all persons interested in
he cannot subsequently ask for its
the subject matter of litigation, whether it is
reformation.
a legal or an equitable interest should be made
Where one party has brought an action to parties in suits to reform written instruments,
enforce the instrument. — Article 1367 is so that the court may settle all of their rights at
based on estoppel (Art. 1431.) or ratification. once and thus, prevent the necessity of a
multiplicity of suits.
When a party brings an action to enforce the
contract, he admits its validity and that it Thus, in an action to reform a deed of sale, all
expresses the true intention of the parties. parties claiming an interest in the property
or any part thereof purportedly conveyed by
The bringing of the action is thus inconsistent the instrument sought to be reformed and
with reformation. There is no prohibition whose interests will be affected by the
against joining in one action the reformation of reformation of the instrument are necessary
instrument and its enforcement as reformed. parties to the action.

WHO MAY ASK FOR REFORMATION


Art. 1368. Reformation may be ordered at
the instance of either party or his successors
in interest, if the mistake was mutual;
otherwise, upon petition of the injured party,
or his heirs and assign.

(1) Either of the parties, if the mistake is


mutual under Articles 1361, 1364, and 1365;
(2) In all other cases, the injured party, under
Articles 1362, 1363, 1364, and 1365; and
(3) The heirs or successors in interest, in
lieu of the party entitled. (Art. 1368.)
The effect of reformation is retroactive from the
time of the execution of the original instrument.

PROCEDURE FOR REFORMATION

Art. 1369. The procedure for the reformation


of instruments shall be governed by rules of
court to be promulgated by the Supreme
Court.

The Rules of Court govern procedure.


However, the Supreme Court has not as yet

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