RFBT
Contracts – Meeting of the Minds
2 parties


Debtor – possessor of the obligation (obligor)
Creditor – possessor of the right to demand (obligee)
To create a periodical relation
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
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Give
Do
Not to do (Not to Give)
Definition and Kinds (CORPND)
1. Consideration
 Onerous – with value in return
Ex. Sales (income/ business)
 Gratuitous – without the value of return
Ex. Donations
 Remuneratory – in return for a past service/
benefit
Ex. Employment/ service
2. Obligation of parties
 Unilateral – 1 party only (Donation – Donor)
 Bilateral – Both parties
3. Risk
 Commutative – risk is not important part of it
(sales)
 Aleatory – Determined by risks (insurance/ lotto)
4. Relationship with other contracts
 Principal – stand alone
Ex. Sales & Partnership
 Accessory – cannot stand alone
Ex. Pledge & Mortgages
 Preparatory – They will result to new contract
always
Ex. Partnership
5. Perfection (legal Birth)
 Consensual – Valid in any form (orally & written)
Meeting of the minds (sales & partnership)
 Formal – Meeting of minds/ forms/ valid
Ex. Donate (land) PI Notarized
 Real – Delivery of object
Ex. Pledge
6. Name
 Nominate – with name, civil code, special
contract
 Innominate – without name
a. Du et des – Give; Give
b. Du ut facias – Give; Service
c. Facio ut des – Service; Give
d. Facio ut facias – Service; Service
7. Defect
 Valid but defective
 Rescissible
 Voidable
 Unenforceable
 Invalid form the start
 Void
Basic Tenets / Canons/ Principles
1. Freedom to contract/ Autonomy of contract/ liberality
of contract – a person can enter into any contract/
agreement provided not unlawful
2. Relatively of contract – Who has right to obligation;
contracting parties and their assign succession in interest
(heirs/ estates)
 if 3rd person (stranger) you have no privity of
contract except = stipulation pour auturi
 in favor of 3rd person
ex. Trust (trustor & trustee) – benefit of
beneficiary
2 rights – communicated to 3rd party or legal
guardian; accepted by him/ legal guardian
3. Obligation of contract – contract of the force and effect
of law.
 Mandatory (go to court to tell you)
 Juridical necessity
4. Mutuality of contract – contract is mutual binding to the
both parties. Also known “equality of contracting parties”.
5. Consensuality of contract – meeting of mind (perfected)
in any form. Except: formal contract/ solemn meeting of
minds & form
Real contract – meetings of minds and delivery
Stages in the life of Contract
1. Negotiation/ conception/ bargaining/ generation –
Characterized by offer and counter offer (nonacceptance)
 no meeting of minds hence offer can withdrawn
anytime through email, electronic data message
(EPM)), & text.
 Effective immediately even if it is not receive by
the other party
 Manifestation theory/ expedition theory
 Exception: when option money (reservation fee)
is given to other party.
 Option money: it is not a downpayment but
can be converted to DP.
 Ernest money: downpayment
2. Perfection – There is no meeting of minds. Concur offer/
complete of acceptance (complete & unconditional)
3. Consummation (death of contract)
 Performance stage
 Execution stage
 Termination
Elements of Contract
1. Essential – without them: no contract/ VOID
2. Natural – without them contract is still valid but automatic
even if not stipulated.
Remedies- ex. Warranty for hidden defects – sale
3. Accidental – present only if stipulated.
Ex. Interest
rate
Common essential – present in all valid contracts; always
present. [ consent + object + cause/ consideration]
Special EE – present in some valid contracts only.
a. Formal/ solemn contract – consent, object, and cause
+ forms. (Limited partnership)
b. Real contract – consent, object, and cause + delivery
(pledge)
Consent – meeting of minds/ perfection stage/ birth of a
contract/ stage of legal relationship
3 factors about consent

1. Contractual/ legal incapacity
a. Minor (below 18) voidable
 Thru their legal guardian except necessary
(food & medicine)
 Misrepresented his age (estopped already)
b. Insane/ mentally defective (void contract
because they can communicate)
 Morone, imbecille, idiot (5 to 6 mental age).
Except: during lucid interval for insane [ drunk,
hypnotic, spell, somnambulism] VOIDABLE
only
c. Deaf – mute illiterate
d. Civil interdicts – prison over 12 years
 No contract except donation
 Mortis cause (wills)
e. These specifically disqualified
Ex. Husband and wife cannot sale, donate;
universal partnership.
2. With capacity but consent is vitiated by
FMUIV (uses of consent)
Fraud (no real cognition)– dolo causante;
autograph; deed of sale
Remedy: annulled within 4 years from discovery of
fraud
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Mistake (no real cognition) – in the object
Remedy: annulled within 4 years from discovery of
mistake
Undue influence (no real volition)– relationship/
moral superior over another
Remedy: estopped
Intimidation (no real volition) – moral fear of a
grave evil (you, family, and property)
Remedy: estopped
Violence (no real volition) – Physical (pouri); force
to compel to other person.
Remedy: estopped
3. With capacity but contract is simulated
2 kinds of Simulation
a. Absolute simulation (silent) – void because the
parties have no intention at all to implement a contract
they prepared.
b. Relative simulation – valid because parties have
intention to enter into a contract. ( 1 real (donation), 1
fake( deed of sale) or false shown) true agreement
Object of a contract – anything or determined to its kind or
service provided not under any COFII (void or invalid)
a. Contrary to law
b. Outside of the commerce of men
c. Future inheritance (but present hereditary right =
valid)
d. Impossible service
e. Intransmissible rights
Cause/ consideration – reason why the party enter to the
contract.
Cause/ Consideration
Essential element
Extrinsic reason other
party knows
Juridical objective/
reason
Motive
Not essential
Not important in civil
law only in criminal law
Intrinsic reason
because not known to
other party (even illegal
= no effect)
Subjective/ personal/
psychological
Lesions (loss) – insufficient consideration



Contract is still valid unless it can proven
stimulated.
Vitiated consent
Real agreement: donation
Cause/ Consideration (VOID= essential element)
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*Statute of fraud violation- contract must be in writing
otherwise; still valid, but not enforceable to court dismissed (if
no written evidence)
False
Uncertain
Cannot be determined
COFI2
- agreement in consideration of marriage after than mutual
promise to marry
- agreement not to be perform w/in a year from meeting of
minds
Reformation of contract – meeting of minds of parties but the
written contract did not show the real intention due to fraud,
mistake, inequitable contract, negligence) Remedy: Annulment
of contract because no meeting of minds due to FAMIN in a
contract they signed)
- agreement to answer; debt of another
* Lease – real property (land) or immovable property if over 1
year.
Interpret
* Sale
1. Words vs. numbers – words
2. Words – printed & written
3. Do not interpret in forms of party who caused the
ambiguity.
4. If onerous (sale) interpret in favor of both parties.
o
o
Personal property/ movable – 500 pesos or more
Real property/ immovable – any amount
For execution contract only from either party – no performance.
2. Voidable contract – Has 2 options.
5. If doubt – principal object; void no specific thing.
I.
Annual w/in 4 years
Defective contracts
Defective contracts
1. Rescissible
Prescription
After 4 yrs. not
rescissible
2. Voidable
After 4 yrs. not
voidable
3. Unenforceable No prescription
4. Void
No prescription
Remedy
Secondary – all
other remedies
(exhaust)
Primary – no need
to exhaust other
Primary – no need
to exhaust other
Primary – no need
to exhaust other
Void Contract – No remedy what so ever (no ratify)
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Absolutely stimulated contract
Law specially declared if void
Impossible service
Intransmissible right
Intent cannot be determined
Contrary to law
Outside the commerce of men
Object – inexistent of meeting minds
1. Unenforceable – cannot enforce to court; dismiss like void
contract unless ratify.
* Agency – no authority in excess of authority (unless physical
will ratify)
* Both – incapacited parties
II.
1.
Rescissible
2.
Voidable
(annulable)
3.
Unenforceable
(validable)
4.
Void/ null ab
ibnitio
Valid
Binding
Exist
Ratified
Waive
Ratify w/ in the 4 years or no need after 4 years (deemed
ratified)
a. Incapacitated – annual within 4 yrs. for the
incapacitated & estopped
b. Vitiated consent – 1 party (consent) is created under
the influence of FMUIV
3. Rescissible Contract

Defrauded- creditor in a contract or his debtor
donated his property to escape his debts
 Insolvent debtor - He paid his debts which are not
yet due
 Lesion over 1 year
 Gurdian: wards proxy
 Representative: Absentee’s proxy missing
person (DOA)
 If exactly 1 years or 25% not rescissible
 Sale of property – in litigation without court approval

2. Accion Pauliana (rescission) – action of the creditor
to rescind contracts by his debtor to defraud him. Ex.
Donation to escape his debts.
All other contract declared rescissible by law –
ex. sale in violation of right of 1st refusal
Requirement
Kinds of Obligation
1. Exhaust all remedies first’
2. Period to rescind – 4 years from appearance of
absentee
3. Restitution (return of money or object)
4. No innocent 3rd person affected
Primary Obligation
Pure and Conditional
Obligation w/ a period
Alternative and
Facultative
Mancominade &
Solidario
Divisible & Indivisible
Obligation w/ a penal
clause
Remedies of creditor if debtor fails to perform w/ fault –
Fraud, Negligence, Delay, Contra
Principal remedies/ Primary R.
-
Extra: judicial 1st – out of court
Before: Judicial r.
Special Performance – ask the debtor to deliver the debtor
thing promised
Substituted performance- ask a 3rd person to perform at
creditors expense
Equivalent Performance – (pera na lang)
-
-
Action for damages: Mental
a. Moral Damage – moral injury (sleepless nights)
b. Exemplary/ Puritive Damage – Social Injury
c. Nominal Damage – rights violated
d. Temperate Damage
e. Actual/ Compensatory Damage – proof of accounting
f. Liquidated Damage – agreed in advance ex. Penalty
Determinate thing – (specific)/ resperit domino; can be
lost due to fortuitous event
Indeterminate thing- (generic) cannot be lost due to
fortuitous event
To Do/ Not to Do: you can also undo + damages
Civil action
for:
Determinate
thing
Indeterminate
thing
To
Do
Not
to
Do
Special
performance
Substituted
performance
Equivalent
performance
Secondary Remedies/ Subsidiary R. – exhaust all remedies
1. Accion subragatoria (subrogation) – action of the
creditor vs. the debtor of his debtor (debtor of my
debtor is also my debtor)
Secondary Obligation
Real/ Personal
Unilateral/ Bilateral
Individual & Collective
Positive & Negative
Accessory & Principal
Conventional & Legal
Pure obligation
- No condition/ period
- Immediately demandable
Ex. A – B today I give to you this Rolex watch.
Conditional Obligation
-
Subject
Condition: future uncertain event & past event unknown to
parties
Demandable when condition (suspensive) happens except
resolutory condition
Resolutory condition: it’s happening will extinguish the
obligation is until. ( condition subsequent & demandable
immediately)
Obligation w/ a period
-
Subject: Future event (certain to arrive)
Alternative Obligation
-
2 or more objects are due but only 1 must be performed.
Ex. A- B my dog or my cat or my hippo or my anaconda
Choice: debtor or creditor
If silent: debtor’s choice
Facultative Obligation
-
Only 1 is due lad can be substituted.
Ex. A-B my anaconda or my cute turtle
Always debtor’s choice
Joint Obligation
-
2 or more debtors & 2 or more creditors
But pro rate share of each DR or CR (proportionate)
Solidary Obligation
-
Joint & Several
Entire Obligation
1 for all, All for 1
Period- Determines when obligation is due and demandable.
A. Solidarity is not presumed
-
When?
-
Can provide; Ex. Conspiracy to commit crime/fraud
Parties stipulated
Debtors
A
B
C
D
Creditors (2,000,000)
W
X
Y
Z
1. How much can W to A if silent? 25,000
2. How much can W to A if solidary obligation?
2,000,000
3. How much can W to S if active solidarity? 500,000
but W can collect up to 2,000,000 liabilities of A
4. How much can W to A if passive solidarity?
500,000 but A can be liable up to 2,000,000. (500k is
the maximum amount W can collect)
B. If Solidary debtor pays – solidary creditor?
A. entire obligation is extinguished
B. a new obligation arises: joint obligation of
reimbursement
C. But no obligation to reimburse if before solidary
debtor paid the obligation
-
-
1. Kinds
Suspensive period: it’s arrival; obligation (on Dec. 25,
2023)
Resolutory period: it’s arrival; extend the obligation (until)
A day certain: sure to come but unknown when. Ex.
Death of a person (alive)
2. For whose benefit the period
For both parties unless stipulated in favor of other party
Dr’s benefit only
Cr’s benefit only
Ex. A to B 1,000,000 on 12/25/2023
On or before (debtor has the option) 12/25/2023
On 12/25/23 unless CR demands sooner
3. Cases when debtor loses the benefit of the period
(immediately demandable)
a. Insolvent – DR
b. Failed – guarantee be promised
c. Impaired – thru his fault; no substitution here
d. Disappear/lost – thru F.E. ( unless DR – CR a
satisfactory substituted)
e. Violated the condition for the period ( bank loan = FS)
f. Absconded- DR
g. Stipulated
4. When? – courts intervene to FIX the period (both
dr or cr)
a. Period – 1 will pay when my means will permit me to
pay.
b. Period – sole will of the debtor
It was already? Legally extinguish
- Potestative (condition)
Obligation w/ a penalty (penal clause)
1. Purpose
- Ensure performance
- As a form of damages (liquidated O. if agreed in advance)
- No more penalty except (stipulated, DR’s Fault, and DR
refuses to pay = penalty)
2. Limit penalty
a. If illegal (immoral) - it is void principal obligation subsist
if unlawful. (but if principal obligation is unlawful penalty
automatically follows)
b. If excessive
- Ex. 10% for every minute of delay
- Court can reduce or void if w/o voiding the principal
obligation.
Principal
Penalty
Effect
1
Car
Shabu
Car remains
2
Shabu
Car
Both = Void
Dr’s will – void (kung feel ko)
Cr’s will – valid (kung feel mo)
Potestative period- Dr & Cr (court will fix it); little by
little
c. Period – intended by them but not fixed.
Ex. I pay you ASAP.
Condition:
1.
2.
3.
4.
5.
Illegal: INVALID
Immoral: INVALID
Impossible: INVALID
Not to do any of the 3 above: VALID
DR prevented the condition to happen:
DEMANDABLE
6. Potestative ( sole will – 1 party)
Dr’s will – void (kung feel ko)
Cr’s will – valid (kung feel mo)
Extinguishment of Obligation
1.
2.
3.
4.
5.
6.
7.
Payment/performance
Loss on the thing due
Condonation/ remission
Confusion/ merger of rights
Compensation/ set off. (off-setting)
Novation
Other analogues modes (secondary not exclusive)
Payment/ Performance
-
-
-
Review obligation (payment):
a. Give
Determinate/specific: legal, accessory, obligation (LAO)
Accessory
1. Delivery
a. Accession – improvement of land
b. Accessories – parts (CAR)
2. Delivery of fruits
a. Natural – Baby/Animal
b. Industrial – Harvest/ Farm
c. Civil – Rent home/ Lessee
3. Pending Delivery
a. Take care- diligence of a good father; of a family (ord.
diligence)
Unless: Law- higher degree
Indeterminate/ generic: NO LAO
b. To do
c. Not to do
Performance (Monetary Obligation)
Special Modes of Payment
-
-
1. Dacion en pago/ Dation in payment
The debtor is solvent
Creditor is 1 only; obligation is automatic extinguish
2. Assignment in favor of creditors
The debtor is insolvent
2 or more creditors: obligation is not automatic extinguish
until accounting
CESSION
3. Tender of payment/ consignation – offer to pay but
CR refuses w/o valid cause of cannot accept due to
some reasons.
Paid to the court (judicial deposit)
No automatic consignation unless there is valid tender of
payment
Except in the ff. cases: CLURITS
Constitution is immediately allowed (w/o T of P)
1. Court to order – pay
2. Location of the CR – change of address
3. Unknown CR – He died; Heirs?
4. Refuses to issue a receipt (CR)
5. Incapacitated – CR ex. Illness
6. Two or more reasons- Creditors
7. Stipulated
4. Application of payment
- Exception to individual of payment
a. 1 dr or 1 cr
b. 2 or more debts
c. All are due
d. Dr pays – partial only
1. Dr 1st option
2. If no option exercise – CR apply or proportionally
( but pay 1st all accrued interest)
Loss on the thing due
 Without Dr’s fault – Extinguish
 With Dr’s fault - Damages
a) Perishes – Physical Law
b) Goes out of commerce – Legal Law
c) Disappear (unknown where) – Civil Law
Ex. TITANIC
Condonation/ Remission – Gratuitous forgiveness of debtor’s
obligation by his creditor
- Debtor’s acceptance is required
Confusion/ Merger – A person becomes the CR or DR w/
himself
Ex. An issuer (mr. x) of a check (negotiable/ installment) to A,
B, and C.