REVIEWER FOR THE FINAL EXAMINATION IN “THE
x x x If at any
LAW ON OBLIGATIONS AND CONTRACT”
Definition:
Contract is a meeting of minds between two (2)
parties whereby one binds himself with respect to the other
to give something or render some service.
Elements of a contract:
1. Essential elements without which there can be no
contract:
(a)Consent- manifested by the meeting of the offer and the
acceptance upon the thing and the cause which are to
constitute the contract.
(b) Object- constitute all things which are not outside the
commerce of men, including the future things.
(c) Cause- reason why the parties enter in a contract.
2. Natural elements –it is inherent in every contract albeit
the fact that the parties do not provide for them because the
law, being suppletory to the contract creates them.
Example: warranty against hidden defects
3. Accidental elements – are those which exist only when
the parties expressly provide for them for the purpose of
limiting or modifying the normal effects of the contract. 66 It
cannot exist if not fix in the contract.
Example: contract of mortgage.
Principal characteristics of a contract:
1. Autonomy of wills – the parties may stipulate anything as
long as the contract is not illegal, immoral, or against public
policy.
2. Mutuality – this means performance or validity of the
contract must be binding to both parties.
Obligatory Force – parties are bound to follow the terms and
condition base on their stipulation.
3. Obligations arising from contracts shall have the force of
law between the contracting parties and should be complied
with in good faith.
Relativity of contracts- According to Article 1311
of the Civil Code, contracts take effect only between the
parties, their assigns and heirs, except in case where the
rights and obligations arising from the contract are not
transmissible by their nature, or by stipulation or by
provision of law.
Case digests
GF Equity Incorporation vs. Arturo Valenzona
G.R. No. 156841.
June 30, 2005
Facts:
GF Equity hired Arturo Valenzona as Head Coach
of the Alaska basketball team in the Philippine Basketball
Association. It was stated under a Contract of Employment
that GF Equity would pay Valenzona the sum of P35,000.00
monthly. The employment period agreed was for two years
commencing, the last sentence of paragraph 3 of the
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contract carried the following condition: 3.
time during the contract, the coach, in the sole opinion of
the corporation, fails to exhibit sufficient skill or
competitive ability to coach the team, the corporation may
terminate this contract.
Valenzona acceded to the terms of the contract.
Thereafter, he was terminated as coach of the Alaska team.
Valenzona demanded from GF Equity payment a
compensation arising from the arbitrary and unilateral
termination of his employment. GF Equity, however,
refused the claim. Valenzona thus filed before the Reginal
Trial Court Manila a complaint against GF Equity for
breach of contract with damages. The trial court, upholding
the provision of the contract, thus, dismissed the complaint.
Issue:
Whether the last sentence of paragraph 3 is
violative of the principle of mutuality of contracts.
Held:
Mutuality is one of the characteristics of a contract,
its validity or performance or compliance of which cannot
be left to the will of only one of the parties.
The ultimate purpose of the mutuality principle is
to nullify a contract containing a condition which makes its’
fulfillment or pre-termination dependent exclusively upon
the uncontrolled will of one of the contracting parties.
In the case at bar, the contract incorporated in
paragraph 3 is the right of GF Equity to pre-terminate the
contract. The assailed condition clearly transgresses the
principle of mutuality of contracts. In that contract, GF
Equity was given an unrestrained prerogative to pre-
terminate the contract irrespective of the soundness, fairness
or reasonableness, or even lack of basis of its opinion.
The court declared that the stipulation is violative
of the mutuality principle underlying in Article 1308 of the
Civil Code. Therefore, it is null and void.
Classification of Contracts
(a) According to their relation to other contracts:
1. Preparatory- subject to condition towards the
celebration of another subsequent contract.
Example: Contract of Agency
2. Principal- contract which can stand by itself.
Example: Contract of Sale
3. Accessory- the existence of which is dependent with
another contract.
Example: Contract of Mortgage
(b) According to form:
1. Formal- contracts which require a specific form.
Example: Contract of Donation
2. Informal- contracts which do not require a specific
form.
Example: Contract of Loan
(c) According to perfection:
1. Consensual- perfected by mere agreement of the
parties.
Example: Contract of Sale
 2. Real- contract which are perfected not only by the
consent of the parties but also the delivery of the
object.
Example: Contract of Pledge.
(d) According to their purpose:
1. Transfer of ownership
Example: Contract of Sale
2. Conveyance of use
3. Rendition of services
Example: Contract of Agency
(e) According to their cause:
1. Onerous- In onerous contracts, the cause is
understood to be, for each contracting party, the
prestation or promise of a thing or service by the
other (Article 1350 Civil Code).
2. Remuneratory- the cause is the service or benefit
which is remunerated.70
3. Gratuitous-contracts of pure beneficence, the mere
liberality of the benefactor.71
(f) According to the nature:
1. Unilateral- only one party is required to give
something to another party.
2. Bilateral- contract where both parties are required to
give something or to do something for both of them.
(g) According to their names or designation:
1. Nominate- those which have their own individuality
and are regulated by special provisions of law.
(h) Innominate- those which lack individuality and not
regulated by special provisions of lawAccording to
the risks involved:
1. Commutative- it is a contract where each of the
parties acquires an equivalent prestation.
Example: Contract of Lease
2. Aleatory- fulfillment of which depends upon a
chance.
Example: Contract of Insurance
Stages of contract:
1. Preparation- preliminary process for the
formation of a contract.
2. Perfection- birth of the contract.
3. Consummation (or death or termination)-
fulfillment of the purpose for which the
contract was constituted. (3 Castan, 7 th Ed., p.
399)
Four Kinds of Innominate Contracts:
(a) Du ut des (I give that you may give)
(b) Do ut facias (I give that you may do)
(c) Facio ut des (I do that you may give)
(d) Facio ut facias (I do that you may do)
What is the Relativity of contracts rule under the Civil
Code?
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It means that the contract is binding only between
the parties, their assigns, heirs; strangers cannot demand
enforcement.
Exceptions:
Where the obligation arising from the contract are
not transmissible by their nature, by stipulation, or by
provision of law.
What is stipulation pour autrui?
Stipulation pour autrui is a stipulation in favor of a
third person conferring a clear and deliberate favor upon
him and which stipulation is merely a part of a contract
entered into by the parties, neither of whom acted as agent
of the third person, and as such third person may demand its
provided that he communicates his acceptance to the obligor
before it is revoked ( Florentino vs. Encarnacion [79 SCRA
192])
Requisites of stipulation pour autrui:
(1) Parties must have clearly and deliberately conferred a
favor upon a 3rd person;
(2) The stipulation in favor of a 3rd person should be a part
of, not the whole contract;
(3) That the favorable stipulation should not be conditioned
or compensated by any kind of obligation whatsoever;
(4) Neither of the contracting parties bears the legal
representation or authorization of 3rd party; and
(5) The third person communicates his acceptance before
revocation by the original parties
A real right binds the property over which it is
exercised. This is an Exception to the general rule that a
contract binds only the parties.
Requisites before a third person in this article can be held
for damages:
1. Existence of a valid contract;
2. Knowledge on the part of the third person of the
existence of the contract; and
3. Interference by the third person without legal
justification or excuse.
Interference of Third Persons
If a third person induced a party to violate his side
of the contract, the other party may sue the third person for
damages.
Note: This provision recognizes a situation where a
stranger to a contract can be used by reason of his
unwarranted interference in the contract.
In order that there is consent, the following
enumeration must concur:
1. The consent must be manifested by the
concurrence of the offer and acceptance;
2. The contracting parties must possess the
necessary legal capacity; and
 3. The consent must be intelligent, free,
spontaneous, and real.
CHAPTER 2
ESSENTIAL REQUISITES OF CONTRACTS
Art. 1318. There is no contract unless the
following requisites
Concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the
contract;
(3) Cause of the obligation which is established. (1261)
Consent is an indispensable element in a contract,
without which, there can be no contract. It means compliance
of the parties with regard to the terms of the agreement.
There can be no consent under the following
instances:
1. When the agreement entered into in behalf of another
who has never given his authorization therefor. (Tolentino
vs. Paraiso, 34 Phil. 609)
2. When the agreement is absolutely simulated or
fictitious (De Belen vs. Collector of Customs, 46 Phil 241).
3. Where the consent of a party is subject to a condition
and the condition has not been complied with. (Lim vs. Sun
Life Assurance, 41 Phil 263).
Rule on offer
Settled is the ruled that where there is merely an
offer by one party without an acceptance by the other, there
is no consent. (Gamboa vs Gonzales, 17 Phil Phil. 381).
The offer must be certain.
It must be specific and definite to constitute
meeting of minds.
Example: If RYD has several cars and offers to sell
his cars to MEM without designating which specific car he
is selling, the offer is not certain.
What about advertisement?
According to Art. 1325 of the Civil Code, business
161not definite offers, but
advertisements of things for sale are
mere invitations to make invitations to make an offer unless
it appears otherwise.
Advertisements for bidders are simply invitations
to make proposals, and the advertiser is not bound to accept
the highest or lowest bidder, unless the contrary appears73
General rule on acceptance
The acceptance must be absolute.
If the acceptance is qualified, it constitutes a
counter-offer.
Example: ABS offers to GMA his 1999 Toyota
Corolla in the amount of P130,000.00. GMA accepts the
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offer but willing to pay the car for only P120,000.00. The
acceptance of the latter is known as qualified acceptance
constituting a counter-offer. If that is the case, there is no
perfected contract. However, if ABS will acceptthe counter
offer of GMA, there will be a perfected contract at the
amount of P120,000.00.
What if the acceptance is made by letter or telegram?
Paragraph 2 of this provision provides that
acceptance made by letter or telegram does not bind the
offeror except from the time it came to his knowledge.
However, Art. 54 of the Code of Commerce provide that the
contract is perfected from the moment an answer is made
accepting the offer.
The contention of the Civilists is that the special
provision (Art. 54 of the Code of Commerce) must be
applicable only to purely commercial contracts such as
maritime contracts74
Question: What are the theories applicable to perfection of
contracts?
Answer:
1. Manifestation theory- the contract is perfected from
the moment the acceptance is declared or made. (Art. 54,
Code of Commerce).
2. Reception theory- in this theory, there is a perfected
contract from the moment the notification of acceptance
( even in the simplest manner) is in the hand of the offeror.
3. Expedition theory- the perfection of this contract is
from the moment the offeree transmits the notification of
acceptance to the offeror. This theory is mostly followed
by the majority of American courts. (Jurado, Desiderio P.
Civil law Reviewer 19th Ed, p 753)
4. Cognition theory- contracts are perfected under this
theory when the acceptance comes from the knowledge of
the offeror.
This theory is applicable in our jurisdiction.
Question:
Mr. Enriquez applied for life annuity amounting to
P6,000.00at the Philippine office of Sunlife Assurance
Company. After paying the amount, a provisional receipt
was issued. Thereafter, the agent forwarded the application
to the head office located at Canada. One day after his
death, the Notice of the acceptance from the main office was
received by the heirs of Mr. Enriquez. Can they still recover
the amount?
Answer:
Yes. They can still recover the amount. There is
still no perfected contract in this case. Under the above
provision (2nd paragraph), the contract is perfected only once
the offeror has knowledge of the acceptance made by the
offeree. Here, the offeror was already dead when the notice
of acceptance was received. (Enriquez vs. Sunlife Assurance
Co., (41 Phil 269)
Art. 1320. An acceptance may be express or implied. (n)
An express acceptance can be made orally or in
writing.
It is implied acceptance if it can be inferred from
the conduct of the parties.75
Example: MP offers to sell to CY two (2) kilos of
guava in the amount of P100.00. CY took the mangoes
without informing MP that he will buy the guavas, took the
guavas and sell it to others. CY’s act constitutes implied
acceptance.
Instances when an offer becomes ineffective:
(1) Death;
(2) Civil interdiction;
(3) Insanity;
(4) Insolvency;
Bar problem 1962:
A wrote to his friend, B stating to his letter that he
(A) is donating to him (B) one new car worth p25,000.00.
Upon receipt of the letter, B, called A by long distance
telephone telling him that he is accepting the donation.
Immediately after mailing the letter, B died of a heart
failure. Who is entitled to the car now, A or the heirs of B?
Answer:
A is entitled to the car. The donation in this case
cannot produce any effect. According to Art. 748 of the
Civil Code, if the value of the personal property donated
exceeds P5,000.00, the donation shall be in writing;
otherwise the donation is void. According to Art. 1323, an
offer becomes ineffective upon the death, civil interdiction,
insanity, or insolvency of either party before acceptance is
conveyed. The contract of donation in this case has never
been perfected.
Who are incapacitated to give their consent in a
contract?
1. Unemancipated minors- emancipation takes place
by reaching the age of majority which is eighteen years old
(Art. 234, Family Code as amended);
2. Insane or demented persons- the exception is when
the contract entered into was committed during lucid
interval;
Take note that lucid interval refers to the period of
rationality and clearness of mental state of an insane or
demented individual.
3. Deaf- mutes who do not know how to write;
4. Married women of age in cases specified by law;
5. Persons suffering from civil interdiction; and
6. Incompetents under guardianship.76
A contract entered into by the above-named
incapacitated persons are voidable.77
When both parties are incapable of giving consent
to a contract, the contract is unenforceable. (Art. 1403, Civil
Code)
The incapacity is subject to the modifications
determined by law, and is understood to be without
prejudice to special disqualifications established in the laws.
(Art. 1329, Civil Code)
In cases of emancipated minor, the following are
the exceptions to the rule that a contract entered into without
the consent of his parents or guardians are voidable:78
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1. When a contract is entered into by a minor who
misrepresents his age, applying the doctrine of
estoppel (Mercado and Mercado vs. Espiritu, 37
Phil.125);
2. Where the contract involves the sale and delivery
of the necessaries to the minor (Art. 1489,par 2,
CC);
3. Where it involves a natural obligation and such
obligation is voluntarily fulfilled by the minor,
provided that such minor is between 18 and 21
years of age. (Arts 1426,1427, CC);
4. When it is a marriage settlement or a donation by
reason of marriage, provided that the marriage is is
between 20 and 21, if male, or between 18 and 21
if female (Arts 120, 128, Civil Code; and
5. When it is a life, health or accident insurance taken
on the life of the minor, provided that the minor is
18 years old or more and the beneficiary is the
minor’s estate, or the minor’s father, mother,
husband, wife, child, brother or sister.79
Art. 1327. The following cannot give consent to
a contract:
(1) Unemancipated minors;
(1) Mistake;
(2) Violence;
(3) Intimidation;
(4) Undue influence; or
(5) Fraud;
(2) Insane or demented persons, and deaf-
mutes who do not know how to write. (1263a)
Vices of consent:
Simulation of contract may also be included80
Note: Voidable is a term typically used with
respect to a contract that is valid and binding unless avoided
or declared void by a party to the contract who is
legitimately exercising a power to avoid the contractual
obligations.81
Mistake
It may be defined not only as the wrong conception
of a thing, but also as the lack of knowledge with respect to
a thing.
Mistake of fact
In the case of Luna vs. Linatoc, (74 Phil 15; 3
Castan, 7th Ed., pp. 330-331), the court held that there is a
mistake of fact when one or both parties believe that a fact
exists when in reality it does.
Here, the contract may be declared as voidable.
Mistake of law
It arises out of ignorance of the provisions of
law, or from an erroneous interpretation180of its meaning, or
from an erroneous conclusion as to the legal effect of the
agreement, on the part of one of the parties.
Requisites:
a. There must be mutual error.

b. The error must refer to the legal effect of the agreement.
c. The real purpose of the parties is frustrated.
Undue influence
It means improper advantage of his power over the
will of another, depriving the latter a reasonable freedom of
choice. It need not be an unjust or unlawful act.
It is any means employed upon a party which,
under the circumstances, he (the aggrieved) could not well
resist and which controlled his volition and induced him to
give his consent to the contract—which otherwise he would
not have entered into.
Art. 1338. There is fraud when, through
insidious words or machinations of one of the
contracting parties, the other is induced to enter into a
contract which, without them, he would not have agreed
to. (1269)
Example:
AA induced BB to buy a watch which he claimed
as a genuine Tag Heuer limited edition but AA knew along
the way that his claim is false. Therefore, the act of AA
constitutes fraud and as such, it is voidable.
Art. 1339. Failure to disclose facts, when there is
a duty to reveal them, as when the parties are bound by
confidential relations, constitutes fraud. (n)
SECTION 2
OBJECT OF CONTRACTS
Object of contracts:
1. It should be within the commerce of men- the object
must be susceptible of appropriation and transmissible from
one person to another;
2. The object should be real or possible- it must exist
from the moment of celebration or subsequently or even in
the future.83
3. It must not be contrary to law, morals, good
customs, public order or public policy.
4. The object should be determinate, or at least,
possible of determination, as to its kind.84
Future inheritance may not be an object of a
contract, unless expressly authorized by law.
Example of objects which cannot be appropriated
or transmitted:
1. Common things like air or the sea;
2. Sacred things;
3. Property belonging to public domain; creek, canal,
streets, sidewalks cannot be an object of a contract;
4. Objects which are prohibited by virtue of special
laws such as drugs, explosives, contrabands;
5. Res nullius (nobody's property)86
Note that it is anything that can be owned, but not a
subject in law such as a citizen.
SECTION 3
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CAUSE OF CONTRACTS
Art. 1350. In onerous contracts the cause is
understood to be, for each contracting party, the
prestation or promise of a thing or service by the other;
in remuneratory ones, the service or benefit which is
remunerated; and in contracts of pure beneficence, the
mere liberality of the benefactor. (1274)
CHAPTER 3
FORM OF CONTRACTS
Art. 1358. The following must appear in a
public document:
(1) Acts and contracts which have for their
object the creation, transmission, modification or
extinguishment of real rights over immovable property;
sales of real property or of an interest therein a governed
by Articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of
hereditary rights or of those of the conjugal partnership
of gains;
(3) The power to administer property, or any
other power which has for its object an act appearing or
which should appear in a public document, or should
prejudice a third person;
(4) The cession of actions or rights proceeding
from an act appearing in a public document.
All other contracts where the amount involved
exceeds five hundred pesos must appear in writing, even
a private one. But sales of goods, chattels or things in
action are governed by Articles, 1403, No. 2 and 1405. (1
CHAPTER 4
REFORMATION OF INSTRUMENTS (n)
Nature of Reformation of instruments
It is a remedy by means of which a written
instrument is amended or rectified so as to express or
conform to the real agreement or intention of the parties
when by reason of mistake, fraud, or inequitable contract, or
accident the instrument fails to express such agreement or
intention.
Requisites of Reformation of instruments:
(a) There is a meeting of minds between or among
the contracting parties;
(b) The written instrument does not express the
true agreement or intention of the parties:
(c) Failure to express the true intentions is due to
mistake, fraud, inequitable conduct or accident;
Second paragraph of this provision provides that if
mistake, fraud, inequitable conduct, or accident has
prevented a meeting of the minds of the parties, the proper
remedy is not reformation of the instrument but annulment
of the contract.
Reformation and Annulment distinguished
 In reformation, there has been a meeting of the
minds of the parties, hence, there is a perfected contract
while in annulment, there has been none, and the consent of
one of the parties being vitiated by mistake, fraud,
inequitable conduct, or accident.
Rescissible Contract
It implies a contract which, even if initially valid, produces
a lesion or pecuniary damage to someone. The purpose is to
set aside the contract for reasons of justice and equity
Characteristics of rescissible contracts:
1. It is one which has all the essential requisites of
a contract but which may be set aside by reason of injury in
one of the contracting parties or the third persons.
2. Before rescission, they are valid and therefore
legally effective.
3. They are susceptible of convalidation only by
prescription and not by ratification.
4. They can be attacked directly but not
collaterally.
5. They can be attacked either by a contracting
party who suffers injury or by a third person who is
defrauded.
Contracts that are rescissible
(1) Those which are entered into by guardians
whenever the wards whom they represent suffer lesion by
more than one-fourth of the value of the things which are
the object thereof;
(2) Those agreed upon in representation of
absentees, if the latter suffer the lesion stated in the
preceding number;
(3) Those undertaken in fraud of creditors when the
latter cannot in any other manner collect the claims due
them;
(4) Those which refer to things under litigation if
they have been entered into by the defendant without the
knowledge and approval of the litigants or of competent
judicial authority;
(6) All other contracts specially declared by law to
be subject to rescission. Rescission may be judicial or extra
judicial
In the case of Barreso v. Leano (June 4, 2004), the
court held that if there is a mere collateral agreement, like
the payment of the mortgage amount, none payment of the
same is a mere slight breach. Breach of it is not going to
warrant rescission. The seller is not prejudiced. Only the
aggrieved party may exercise the right of rescission.
CHAPTER 7
VOIDABLE CONTRACTS
Voidable contracts
Voidable contracts are those in which all the
essential elements for validity are present but the element of
consent is vitiated either by lack of legal capacity of one of
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the contracting parties, or by mistake, violence,
intimidation, undue influence or fraud.
The following contracts are voidable or annullable, even
though there may have been no damage to the
contracting parties:
(1) Those where one of the parties is incapable of
giving consent to a contract;
(2) Those where the consent is vitiated by mistake,
violence, intimidation, undue influence or fraud.
These contracts are binding, unless they are
annulled by a proper action in court. They are susceptible of
ratification. (n)
Art. 1391. The action for annulment shall be
brought within four years.
This period shall begin:
In cases of intimidation, violence or undue
influence, from the time the defect of the consent ceases.
In case of mistake or fraud, from the time of the
discovery of the same.
And when the action refers to contracts entered
into by minors or other incapacitated persons, from the
time the guardianship ceases. (1301a)
Bar exam question (1990):
XX was the owner of a 10,000 sq meter property.
XX married YY. Their children are AA, BB, and CC. After
the death of YY, X married ZZ. Their children are DD,EE
and FF. after the death of XX, All His children AA, BB, CC,
DD,EE, and FF executed an extra judicial partition of the
afore stated property on may 1, 1970. His children in his
second marriage (DD, EE and FF) were minors at that time.
They were given a total of 3, ooo square meter portion of
the property.
They were induced by AA, BB, and CC. They filed
an action in court to nullify the suit invoking fraud and
alleging they were minors during that time.
a. Can the DD, EE, and FF invoke minority as a
basis to nullify the partition? Explain.
b. What about fraud?
Answer:
a. Yes, minority can be a basis to nullify the
partition because they (DD, EE, and FF) were not properly
represented by their parents or their guardians at the time
they contracted the extra judicial partition.
b. In the case of fraud, when through insidious
words or machinations of one party the other is induce to
enter into the contract without which he would not have
agreed to, the action would still prosper. The action for
annulment may be brought within 4 yrs from the discovery
of the fraud.
Art. 1392. Ratification extinguishes the action to
annul a voidable contract. (1309a)
Ratification of voidable contracts

It is an act or means by virtue of which efficacy is
given to a contract which suffers from a vice or curable
nullity.
Requisites in the ratification of a voidable contract:
1. The contract should be tainted with a vice which is
susceptible of being cured.
2. The confirmation should be effected by the person who is
entitled to do so under the law
3. It should be effected with knowledge of the reason which
renders the contract voidable.
4. The reason which renders the contract voidable should
have already disappeared
CHAPTER 8
UNENFORCEABLE CONTRACTS (n)
Unenforceable contracts
Those which cannot be enforced by a proper court
action in court, unless they are ratified, because either they
are entered into without or in excess of authority or they do
not comply with the Statute of Frauds or both of the
contracting parties do not possess the required legal
capacity.
What contracts are unenforceable unless they are ratified?
1. Those entered into in the name of another person
by one who has been given no authority or legal
representation or who has acted beyond his powers.
2. Those who do not comply with the Statute of
Frauds as set forth in this number. In the following cases, an
agreement thereafter shall be unenforceable by action,
unless the same, or some note or memorandum thereof, be
in writing are subscribed by the party charged or by his
agent; evidence therefore, of the agreement cannot be
received without the writing, or a secondary evidence of its
contents
a. An agreement that by its terms is not to be performed
within a year from the making thereof;
b. A special promise to answer for the debt, default or
miscarriage of another;
c. An agreement made in consideration of marriage,
other than a mutual promise to marry.
Concept of Statute of Frauds
According to Tolentino, The term “statute of
frauds” is descriptive of statutes which require certain
classes of contracts to be in writing. He explain further that
this statute does not deprive the parties of the right to
contract with respect to the matters therein involved, but
merely regulates the formalities of the contract necessary to
render it enforceable.
The statute does not apply to actions which are
neither for specific performance of the contract nor for the
violation thereof. (Facturan vs. Sabanal, 46 off. Gaz. Suppl.
No. 1, p. 310)
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Purpose of the statute of frauds
The purpose of the statute of frauds is to prevent
fraud and perjury in the enforcement of obligations
depending for their evidenve upon the unassisted memory of
witnesses by requiring certain enumerated contracts and
transactions to be evidenced by a writing signed by the
party to be charged. (Shoemaker vs. La Tondena, 68 Phil.
24)
Bar exam Question (1976):
C, husband of D, sold paraphernal property
(property of the wife when she was still unmarried) in her
name without her (D’s consent). Was such sale valid, void,
voidable, rescissible or unenforceable? Explain
Answer:
The sale is unenforceable. According to the CC,
under the law on defective contract, a contract entered into
in the name of another person by one who has given no
authority or legal representation or who has acted beyond
his power (Art 1403 (1) CC) is unenforceable unless ratified
expressly or impliedly, by the person on whose behalf it has
been executed, before it is revoked by the other contracting
party (Art 1317 CC). Since the property which was sold by
C is paraphernal and therefore, it belongs exclusively to C’s
wife D, and since the sale was made without D’s consent,
obviously, the sale is unenforceable
Bar exam question (1982):
“A” and “B” entered into a verbal contract
whereby “A” agreed to sell to “B” his only parcel of land
for P20,000.00 and B agreed to buy at the aforementioned
price. “B”went to the bank, withdrew the necessary amount,
and returned to “A” for the consummation of the contract.
“A”, however, had changed his mind and refused to go
through with the sale. Is the agreement valid? Will an action
by “B” against “A” for specific performance prosper?
Answer:
The agreement is valid. A verbal agreement to sell
land is valid so long as there is already an agreement with
respect to the object and the purchase price.
The action for specific performance will not be
valid unless ratified. The reason is obvious. The property is
covered by the Statute of frauds. It cannot, therefore, be
enforced by a court action because it is not evidenced by any
note or memorandum or writing subscribed by the party
charged.
Question:
B (buyer) purchased from A (seller) a parcel of
land, paying a part of the agreed price, with the
understanding that he will pay the balance upon the
execution of the deed of conveyance. Subsequently, A
(seller) sold the same land to C, who knew of the first sale.
As a result, B (buyer) brought this action against both A and
C to enforce the contract. Defendants contend that the
contract is unenforceable under the Statute of Frauds as
enunciated in No. 2 of Art. 1403 of the CC. decide the case,
stating your reasons.
Answer:
The Supreme Court ruled that “it is well-settled in
this jurisdiction that the Statute of Frauds is applicable only
to executory contracts 90 not to contracts that are totally or
partially performed.91 The reason is simple. In executory
contracts, there is a wide field for fraud because unless they
 are in writing there is no palpable evidence of the intention
of the contracting parties. The statute has been precisely
enacted to prevent fraud.92 However, if a contract has been
totally or partially performed, the exclusion of parol
evidence would prevent fraud or bad faith, for it would
enable the defendant to keep the benefits already derived by
him from the transaction in litigation and at the same time,
evade the obligation, responsibilities, or liabilities assumed
or contracted by him thereby. So that when the party
concerned has pleaded partial performance, such party
entitled to a reasonable chance to establish by parol
evidence the truth of his allegation, as well as the contract
itself.”
CHAPTER 9
VOID AND INEXISTENT CONTRACTS
Void or inexistent contracts
Void contracts refer to those contracts were all of
the requisites of a contract are present, but the cause, object
or purpose is contrary to law, morals, good customs, public
order or public policy, or the contract itself is prohibited or
declared by law to be void.
1. Payment of usurious interest. In such case, the
law allows the debtor to recover the interest paid in excess
of that allowed by the usury laws, with interest thereon from
the date of the payment. (Art. 1413 Civil Code).
2. Payment of money or delivery of property for an
illegal purpose, where the party who paid or delivered
repudiates the contract before the purpose has been
accomplished, or before any damaged has been caused to a
third person. In such case, the courts may allow such party
to recover what he has paid or delivered, if the public
interest will thus be sub served. (Art 1414, Civil Code)
3. Payment of money or delivery of property by an
incapacitated person. In such case, the courts may allow
such person to recover what he has paid or delivered, if the
interest of justice so demands. (Art. 1415, Civil Code).
4. Agreement or contract which is not illegal per se
but is merely prohibited by law and the prohibition is
designed for the protection of the plaintiff. In such case,
such plaintiff, if public policy is thereby enhanced, may
recover what he has paid or delivered. (Art 1416, Civil
Code)

Inexistent contracts, on the other hand, refer to
those where one or some or all of those requisites which are
essential for the validity are absolutely lacking.
The following are inexistent from the beginning:
1. Those whose cause, object or purpose is contrary to
law, morals, good customs, public order, or public
policy.
2. Those which are absolutely simulated or fictitious;
5. Payment of any amount in excess of the
maximum price of any article or commodity fixed by law. In
such case, the buyer may recover the excess.(Art. 1417,
Civil Code)
6. Contract whereby a laborer undertakes to work
longer than the maximum number of hours fixed by law. In
such case, the laborer may demand for overtime pay. (Art
1418 CC)
7. Contract whereby a laborer accepts a wage
lower than the minimum wage fixed by law. In such case,
the laborer may demand for the deficiency.(Art 1419 CC)

3. Those whose cause or object did not exist at the

time of the transaction.

4. Those whose object is outside the commerce of

men.
GOOD LUCK TO ALL |! 
5. Those which contemplate an impossible service.
Thanks for one fruitful semester 
6. To the principal object of the contract cannot
God bless us all! 
be ascertained ;
_ma’am Bernadette P. Yalong. Ll.b
7. Those expressly prohibited or declared void by law.

In addition, those which are the direct results of

various illegal contracts (Art 1422, Civil Code),those where
there is no concurrence between offer and acceptance with
regard to the object and the cause of the contract, and those
which do not comply with the required form where such form
is essential for validity.

Question
What is the principle of in pari delicto? Are there
exceptions? If there are, what are they?

Answer
When the defect of a void contract consists in the
illegality of the cause or object of the contract, and both of
the parties are at fault or in pari delicto, the law refuses
them every remedy and leaves them where they are.

Exceptions:

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