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Contracts (Defective Contracts (Voidable (vitiated consent (intimidation…

- - - - 1383: subsidiary; cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same
      - 1384: only to the extent necessary to cover the damages caused
      - 1385: creates the obligation to return the things which were the object of the contract, together with their fruits, and the price with its interest
    - - in the cases established by law (1380)
        
        the following contracts are rescissible (1381)
        
        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
        
        those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number
        
        those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them
        
        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
        
        all other contracts specially declared by law to be subject to rescission
      - payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected (1382)
      - presumptions (1387)
        
        all contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors, when the donor did not reserve sufficient property to pay all debts contracted before the donation
        
        alienations by onerous title are also presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued
        
        decision or attachment need not refer to the property alienated, and need not have been obtained by the party seeking the rescission
        
        the design to defraud creditors may be proved in any other manner recognized by the law of evidence
    - - 1385: only when he who demands rescission can return whatever he may be obliged to restore
      - 1388, p. 1: whoever acquires in bad faith the things alienated in fraud of creditors, shall indemnify the latter for damages suffered by them on account of the alienation, whenever, due to any cause, it should be impossible for him to return them
      - 1388, p. 2: if there are two or more alienations, the first acquirer shall be liable first, and so on successively
    - - general rule
        
        the action to claim rescission must be commenced within four years
      - exceptions
        
        for persons under guardianship and for absentees, period shall not begin
        
        until the domicile of the absentee is known
        
        until the termination of the ward's incapacity
    - - 1386: rescission of the following with respect to contracts approved by the courts
        
        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
        
        those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number
  - - - the following contracts are voidable or annullable, even though there may have been no damage to the contracting parties
        
        one of the parties is incapable of giving consent to a contract
        
        consent is vitiated
        
        mistake
        
        violence
        
        intimidation
        
        undue influence
        
        fraud
      - binding unless they are annulled by a proper action in court
      - susceptible of ratification
    - - can institute action (1397)
        
        all who are thereby obliged principally or subsidiarily
      - cannot institute action (1397)
        
        persons who are capable cannot allege the incapacity of those with whom they contracted
        
        those who exerted intimidation, violence, or undue influence, or employed fraud, or caused mistake base their action upon these flaws of the contract
      - 1402: as long as one of the contracting parties does not restore what in virtue of the decree of annulment he is bound to return, the other cannot be compelled to comply with what is incumbent upon him
    - - concept (1392)
        
        extinguishes the action to annul a voidable contract
      - manner (1393)
        
        expressly
        
        tacitly
        
        with knowledge of the reason which renders the contract voidable and such reason having ceased, the person who has a right to invoke it should execute an act which necessarily implies an intention to waive his right
      - who may ratify
        
        lack of capacity (1394)
        
        1394: guardian of the incapacitated person (during the ward's incapacity)
        
        incapacitated person (upon gaining capacity)
        
        vice of consent
        
        person whose consent was vitiated
        
        1395: does not require the conformity of the contracting party who has no right to bring the action for annulment
      - effect of ratification
        
        1396: cleanses the contract from all its defects from the moment it was constituted
    - - through the fault of the person obliged by the decree of annulment to return the thing (1400)
        
        he shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date
        (action is not barred)
      - through the fraud or fault of the person who has a right to institute the proceedings (1401, p. 1)
        
        action for annulment of contracts shall be extinguished (action is barred)
      - not due to the fraud or fault of any party (e.g fortuitous event)
        
        person obliged to return shall pay the value of the thing at the time of loss, but without interest (action is not barred)
      - 1401, p. 2: if the right of action is based upon the incapacity of any one of the contracting parties, the loss of the thing shall not be an obstacle to the success of the action, unless said loss took place through the fraud or fault of the plaintiff
    - - general rule (1398)
        
        obligation to give
        
        an obligation having been annulled, the contracting parties shall restore to each other the things which have been the subject matter of the contract, with their fruits, and the price with its interest, except in cases provided by law
        
        obligation to do
        
        the value thereof shall be the basis for damages
      - exception (1399)
        
        when the defect of the contract consists in the incapacity of one of the parties, the incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him
    - - the action for annulment shall be brought within four years
      - when the period begins
        
        intimidation, violence or undue influence
        
        from the time the defect of the consent ceases
        
        mistake or fraud
        
        from the time of the discovery of the same
        
        contracts entered into by minors or other incapacitated persons
        
        from the time the guardianship ceases
    - - fraud (1330)
        
        how to make a contract voidable (1344)
        
        serious
        
        not employed by both contracting parties
        
        how to make a contract not voidable (1344)
        
        incidental fraud only obliges the person employing it to pay damages
        
        kinds
        
        active
        
        nature
        
        1338: 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
        
        what does not constitute fraud
        
        1340: the usual exaggerations in trade, when the other party had an opportunity to know the facts
        
        1341: a mere expression of an opinion (see exception above)
        
        1342: misrepresentation by a third person (see exception above)
        
        1343: misrepresentation made in good faith (but may constitute error)
        
        what constitutes fraud
        
        1341: an expression of an opinion made by an expert upon which the other party has relied on the former's special knowledge
        
        1342: misrepresentation by a third person
        
        created substantial mistake
        
        mutual
        
        passive
        
        1339: failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations
        
        1332: when one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former
      - undue influence (1330)
        
        nature (1337)
        
        a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice
        
        circumstances to be considered (1337)
        
        the confidential, family, spiritual and other relations between the parties
        
        the fact that the person alleged to have been unduly influenced was suffering from mental weakness
        
        the fact that the person alleged to have been unduly influenced was ignorant or in financial distress
      - intimidation (1330)
        
        nature (1335, p. 2)
        
        one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants, to give his consent
        
        how to determine degree (1335, p. 3)
        
        the age, sex and condition of the person shall be borne in mind
        
        cannot vitiate consent (1335, p. 4)
        
        a threat to enforce one's claim through competent authority
        
        third person (1336)
        
        annuls the obligation, although it may have been employed by a third person who did not take part in the contract
      - violence (1330)
        
        nature (1335, p. 1)
        
        serious or irresistible force is employed in order to wrest consent
        
        third person (1336)
        
        annuls the obligation, although it may have been employed by a third person who did not take part in the contract
      - mistake (1330)
        
        can invalidate consent
        
        1331, p. 1: it refers to the substance of the thing which is the object of the contract
        
        1331, p. 1: it refers those conditions which have principally moved one or both parties to enter into the contract
        
        1331, p. 1: mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract
        
        1334: mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated
        
        cannot invalidate consent
        
        1331, p. 2: a simple mistake of account shall give rise to its correction
        
        1333: there is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract
        
        1332: when one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former
      - during a hypnotic spell (1328)
      - state of drunkenness (1328)
  - - - 1317, p. 2: a contract entered into in the name of another by one who has no authority or legal representation, or who has acted beyond his powers
    - - 1403: 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
      - 1403: those that do not comply with the Statute of Frauds
        
        in the ff cases an agreement hereafter made shall be unenforceable by action, unless the same, or some note or memorandum, thereof, be in writing, and 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
        
        an agreement that by its terms is not to be performed within a year from the making thereof
        
        a special promise to answer for the debt, default, or miscarriage of another
        
        an agreement made in consideration of marriage, other than a mutual promise to marry
        
        an agreement for the sale of goods, chattels or things in action, at a price not less than 500 pesos
        
        unless the buyer accept and receive part of such goods and chattels, or the evidences, or some of them, of such things in action or pay at the time some part of the purchase money
        
        but when a sale is made by auction and entry is made by the auctioneer in his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale, price, names of the purchasers and person on whose account the sale is made, it is a sufficient memorandum
        
        a representation as to the credit of a third person
      - 1403: those where both parties are incapable of giving consent to a contract
    - - cannot be assailed by third persons
    - - how (1317)
        
        express
        
        implied
      - who (1317)
        
        person on whose behalf it has been executed
      - when (1317)
        
        before it is revoked by the other contracting party
      - effect (1407)
        
        both parties are incapable of giving consent
        
        by parent, or guardian of one
        of the contracting parties
        
        same effect as if only one of them were incapacitated (voidable)
        
        by parents or guardians of both
        contracting parties
        
        contract is validated from the inception (valid)
    - - 1406: when a contract is enforceable under the Statute of Frauds, and a public document is necessary for its registration in the Registry of Deeds, the parties may avail themselves of the right under art. 1357
        
        1357: the contracting parties may compel each other to observe that form, once the contract has been perfected; this right may be exercised simultaneously with the action upon the contract
  - - - cannot be ratified (1409)
      - the right to set up the defense of illegality cannot be waived (1409)
      - the action or defense for the declaration of the inexistence of a contract does not prescribe (1410)
      - in case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced (1420)
    - - the following contracts are inexistent and void from the beginning (1409)
        
        those whose cause or object did not exist at the time of the transaction
        
        those whose object is outside the commerce of men
        
        those which contemplate an impossible service
        
        those where the intention of the parties relative to the principal object of the contract cannot be ascertained
        
        those expressly prohibited or declared void by law
        
        those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy
        
        those which are absolutely simulated or fictitious (parties do not intend to be bound at all)
      - a contract which is the direct result of a previous illegal contract (1422)
    - - repudiation of contract (1414)
        
        if money is paid or property delivered for an illegal purpose
        
        before
        
        the purpose has been accomplished
        
        any damage has been caused to a third person
      - recovery of money or property
        
        1414: if the public interest will be subserved (in favor of the party repudiating the contract)
        
        1416: when the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designed for the protection of the plaintiff, and if public policy is thereby enhanced
      - recovery of interest (1413)
        
        if interest is paid in excess of the interest allowed by the usury laws, with interest thereon from the date of the payment
    - - not available to third persons whose interests are not directly affected (1421)
      - if the act constitutes a criminal offense (1411)
        
        when both parties are in pari delicto
        
        they shall have no action against each other
        
        both shall be prosecuted
        
        the provisions of the Penal Code relative to the disposal of effects or instruments of a crime shall be applicable to the things or the price of the contract
        
        when only one of the parties is guilty
        
        they shall have no action against each other
        
        the guilty party shall be prosecuted
        
        the innocent one may claim what he has given
        
        he shall not be bound to comply with his promise
      - if the act does not constitute a criminal offense (1412)
        
        when the fault is on the part of both
        
        neither may recover what he has given by virtue of the contract
        
        neither may demand the performance of the other's undertaking
        
        when only one of the contracting parties is at fault
        
        the party at fault cannot recover what he has given by reason of the contract
        
        the party at fault cannot ask for the fulfillment of what has been promised him
        
        the party who is not at fault may demand the return of what he has given without any obligation to comply with his promise
    - - price controls
        
        1417: when the price of any article or commodity is determined by statute, or by authority of law, any person paying any amount in excess of the maximum price allowed may recover such excess
      - employment
        
        1418: when the law fixes, or authorizes the fixing of the maximum number of hours of labor, and a contract is entered into whereby a laborer undertakes to work longer than the maximum thus fixed, he may demand additional compensation for service rendered beyond the time limit
        
        1419: when the law sets, or authorizes the setting of a minimum wage for laborers, and a contract is agreed upon by which a laborer accepts a lower wage, he shall be entitled to recover the deficiency
- - - - nominate
      - innominate
    - - consensual
      - real
    - - innominate
      - things
    - - principal
      - preparatory
      - accessory
    - - bilateral
      - unilateral
      - reciprocal
    - - onerous
      - gratuitous
  - - - definition (1319)
        
        meeting of the offer and the acceptance upon the thing and the cause
        
        offer must be certain
        
        acceptance must be absolute
      - state of the
        contracting parties
        
        who cannot give consent (1327)
        
        unemancipated minors
        
        insane or demented persons
        
        deaf-mutes who do not know how to write
        
        vitiated consent
        
        state of drunkenness (1328)
        
        during a hypnotic spell (1328)
        
        mistake (1330)
        
        violence (1330)
        
        intimidation (1330)
        
        undue influence (1330)
        
        fraud (1330)
    - - what can be objects (1347)
        
        things not outside the commerce of men
        
        including future things
        
        rights which are not intransmissible
      - determinability (1349)
        
        object must be determinate as to its kind
        
        quantity may not be determinate, provided it is possible to determine the same, without the need of a new contract
      - what cannot be objects (1348)
        
        impossible things
        
        impossible services
    - - presumption
        
        1354: although the cause is not stated in the contract, it is presumed that it exists and is lawful
        
        1351: the particular motives of the parties in entering into a contract are different from the cause thereof
      - types of causes (1350)
        
        in onerous contracts, the prestation or promise of a thing or service by the other
        
        in remuneratory ones, the service or benefit which is remunerated
        
        in contracts of pure beneficence, the mere liberality of the benefactor
      - absent/illegal cause
        
        1352: contracts without cause, or with unlawful cause (contrary to law, morals, good customs, public order or public policy), produce no effect whatever
        
        1353: the statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful
      - inadequate cause (1355)
        
        except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract
        
        unless there has been fraud, mistake or undue influence
- - - - without being authorized by the latter
      - unless he has by law a right to represent him
    - - 1312: in contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws
  - - - not only to the fulfillment of what has been expressly stipulated
      - but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law
  - - - 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
      - the heir is not liable beyond the value of the property he received from the decedent
    - - the determination of the performance may be left to a third person (1309)
        
        whose decision shall not be binding until it has been made known to both contracting parties
        
        the determination shall not be obligatory if it is evidently inequitable (1310)
        
        in such case, the courts shall decide what is equitable under the circumstances
      - stipulation pour atrui (1311)
        
        if a contract should contain some stipulation in favor of a third person, he may demand its fulfillment
        
        provided he communicated his acceptance to the obligor before its revocation
        
        the contracting parties must have clearly and deliberately conferred a favor upon a third person
        
        a mere incidental benefit or interest of a person is not sufficient
      - inducement of violation (1314)
        
        any third person who induces another to violate his contract shall be liable for damages to the other contracting party
      - creditors of contracting parties (1313)
        
        creditors are protected in cases of contracts intended to defraud them
- - - - when the law requires that a contract be in some form in order that it may be valid or enforceable (1356)
      - when the law requires that a contract be proved in a certain way (1356)
      - if the law requires a document or other special form (1357)
        
        the following must appear in a public document
        (1358, p. 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 are governed by arts. 1403, No. 2, and 1405
        
        the cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains
        
        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
        
        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 (1358, p. 2)
        
        but sales of goods, chattels or things in action are governed by arts. 1403, No. 2 and 1405
  - - - nature (1306)
        
        the contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy
    - - plain meaning
      - evident intention
      - stipulations with different possible meanings
      - interpretation of terms
      - settlement of doubts
    - - kinds (1345)
        
        absolute
        
        takes place when the parties do not intend to be bound at all
        
        relative
        
        takes place when the parties conceal their true agreement
      - effects (1346)
        
        absolute
        
        an absolutely simulated or fictitious contract is void
        
        relative
        
        a relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement
  - - - meeting of the minds of the parties to a contract
      - true intention is not expressed in the instrument purporting to embody the agreement
      - by reason of mistake, fraud, inequitable conduct or accident
    - - specific cases (1366)
        
        simple donations inter vivos wherein no condition is imposed
        
        wills
        
        when the real agreement is void
      - 1367: one of the parties has brought an action to enforce the instrument
    - - 1360: the principles of the general law on the reformation of instruments are hereby adopted insofar as they are not in conflict with the provisions of this Code
      - 1369: the procedure for the reformation of instrument shall be governed by rules of court to be promulgated by the Supreme Court
    - - 1361: when a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement
      - 1362: if one party was mistaken and the other acted fraudulently or inequitably in such a way that the instrument does not show their true intention
      - 1363: when one party was mistaken and the other knew or believed that the instrument did not state their real agreement, but concealed that fact from the former
      - 1364: when through the ignorance, lack of skill, negligence or bad faith on the part of the person drafting the instrument or of the clerk or typist, the instrument does not express the true intention of the parties (third party fault)
      - 1365: two parties agree upon the mortgage or pledge of real or personal property, but the instrument states that the property is sold absolutely or with a right of repurchase