week 10-11 Flashcards
(188 cards)
1
Q
OBJECT
A
The thing, right, or service which is the subject matter of the obligation which is created or established. Under the Civil Code, the objects of contracts and that of obligations are identical.
2
Q
KINDS OF OBJECT
A
- things (as in sale of property)
- rights (as in assignment of credit)
- services (as in agency)
3
Q
REQUISITES OF THE OBJECT
A
- the thing or service must be within the commerce of man;
- must be transmissible;
- must not be contrary to law, morals, good customs, public order, or public policy;
- must not be impossible (NCC 1348);
- must be determinate as to its kind or determinable without the need of a new contract or agreement (NCC 1349).
4
Q
I. Must be within the commerce of man
Anything that can be legally the subject of commercial transactions.
A
Must be in existence at the time of the perfection of the contract OR it can exist subsequently or in the future. Thus, even future things can be the object of contracts.
5
Q
Future things
A
those which do not belong to the obligor at the time the contract is made, and may be made, raised or acquired by the obligor after the perfection of the contract. It includes not only material objects but also future rights. In this case, the coming into being of the future thing is a suspensive condition.
6
Q
Emptio rei speratae (conditional contract)
A
a conditional sale. There is a suspensive condition. If the future thing does not come into existence, then there is no contract of sale.
7
Q
Emptio spei (aleatory contract)
A
the sale of a hope. Even if the future thing does not materialize, the buyer must pay since the buyer is taking a chance. Hope is a present thing. (Such as the sale of lotto ticket).
In case of doubt about the nature of the contract, it must be deemed to be conditional (NCC 1378).
8
Q
V. Must be determinate as to its kind or determinable
A
The object need not be specific or determinate but it must be determinate as to its kind or species. (e.g. horse, car, dog)
The quantity of the object may be indeterminate so long as the right of the creditor is not rendered illusory, provided it is possible to determine the same, without the need of a new contract between the parties.
9
Q
Determinable
A
can be determined with certainty upon delivery of the thing or object.
10
Q
. WHAT MAY NOT BE OBJECTS OF CONTRACTS (NCC 1347)
A
I. All things outside the commerce of man
II. All intransmissible rights
III. Contrary to law, morals, good customs, public order, or public policy
IV. Future inheritance, except when authorized by law
V. Impossible things or services (NCC 1348)
11
Q
I. All things outside the commerce of man
A
All kinds of things and interests whose alienation or free exchange is restricted by law or stipulation, which the party cannot modify at will.
Common things like the air or the sea, sacred things, res nullius, and property belonging to the public domain;
Those made such by special prohibitions established by law, such as poisonous substances, drugs, arms, explosives, and contrabands
12
Q
WHAT MAY NOT BE OBJECTS OF CONTRACTS (NCC 1347)
II. All intransmissible rights like?
A
Purely personal in character - arising from the relationship of husband and wife, like jus consortium, or from the relationship of paternity and filiation, like patria potestas.
Honorary or political in character - right to hold a public office and the right of suffrage.
13
Q
III. Contrary to law, morals, good customs, public order, or public policy
A
The object must be licit.
14
Q
IV. Future inheritance, except when authorized by law
A
Future inheritance (one where the source of property is still alive) cannot be the subject of a contract.
15
Q
Exceptions to Future inheritance cannot be the subject of a contract.
A
Partitions of property inter vivos by the deceased. (NCC 1080)
Future spouses to give or donate to each other in their marriage settlement their future property to take effect upon the death of the donor (FC 130)
16
Q
WHAT MAY NOT BE OBJECTS OF CONTRACTS (NCC 1347)
V. Impossible things or services (NCC 1348) like?
A
Impossibility must not be confused with difficulty. Hence, a showing of mere inconvenience, unexpected impediments, or increased expenses is not enough.
17
Q
Absolute impossibility
A
(objectively impossible; no one can do it) - arises from the very nature or essence of the act or service itself, renders the contract void.
18
Q
Relative impossibility
A
(subjectively impossible; particular debtor cannot do it) - arises from the circumstances or qualifications of the obligor rendering him incapable of executing the act or service, allowing the perfection of the contract, although the fulfillment is hardly probable.
19
Q
what is CAUSE (CAUSE) NCC 1350
A
The “why of the contract, the essential reason which moves the contracting parties to enter into the contract.’’
The essential or more proximate purpose or reason which the contracting parties have in view at the time of entering into the contract
It is the Civil Code term for consideration in Anglo-American or common law. Many agreements which cannot be supported in Anglo-American law for want of consideration can be enforced under the broader doctrine of causa.
20
Q
Accessory contracts
A
the rule is that the cause of the accessory contract is identical with that of the principal contract.
21
Q
cause DISTINGUISHED FROM CONSIDERATION
A
cause - why of the contract, the essential reason which moves the contracting parties to enter into the contract
consideration - reason by which a man is moved into bind himself by agreement
22
Q
Motive (psychological)
A
is the purely personal or private reason which a party has in entering into a contract which does not affect the other party. It is different from the cause (objective or juridical reason) of the contract, which is the essential reason which moves the contracting parties to enter into it and justifies the creation of an obligation through their will.
23
Q
Cause is
A
objective of a party in entering into the contract,
always known to the other contracting party,
immediate or direct reason
essential element of a contract
illegality of the cause affects the validity of a contract,
24
Q
motive
A
person’s reason for wanting to get such objective.
remote or indirect reason;
may be unknown;
not an essential element of a contract,
the illegality of one’s motive does not render the contract void.
25
motive General Rule:
Motive or particular purpose of a party in entering into a contract does not affect the validity or the existence of a contract.
The presence of motive cannot cure the absence of cause.
26
exception to motive General Rule:
The motive may be considered the cause in a contract when such motive predetermines the cause of the contract.
27
When a motive of a debtor in alienating the property is to defraud his creditors, the alienation is
rescissible.
28
When the motive of a person in giving his consent is to avoid a threatened injury, as in case of intimidation, the contract is
voidable.
29
When the motive of a person induced him to act on the basis of fraud or misrepresentation by the other party, the contract is
voidable.
30
ESSENTIAL REQUISITES OF CAUSE
1. The cause should be in existence at the time of the celebration of the contract.
2. The cause should be licit or lawful.
3. The cause should be true.
31
what's the PRESUMPTION: EXISTENCE AND LAWFULNESS OF CAUSE (NCC 1354)
The presumption is that the cause exists and is lawful unless the debtor proves the contrary.
The alleged lack of consideration must be shown by preponderance of evidence.
It is not necessary that the cause be expressly stated in the contract.
This is true even where the contract falls within the purview of the Statute of Frauds.
32
can there be consent if there is no cause?
no, Consent necessarily means the agreement as to the cause, therefore there can be no consent if there is no cause.
33
does cause have to exist at the time of the perfection of the contract?
but it need not exist later.
This precept is confirmed by NCC 1409 which declares as in existent and void those contracts which are absolutely simulated or fictitious as well as those whose cause did not exist at the time of the transaction.
34
effect of Illegal/Unlawful Cause?
Void from the very beginning.
If one party is innocent he cannot be compelled to perform his obligation, and he may recover what he has already given.
A contract with an illegal cause may produce effects under certain circumstances where the parties are not of equal guilt.
35
effect of Statement of False Cause (NCC 1353)
It would seem that the contract with a statement of a false cause is not void, but merely revocable or voidable.
36
False cause due to simulation
contract is void.
37
False cause due to error
If the parties have another agreement not produced in writing and this true agreement has a different cause then the parties would be bound by their true agreement (NCC 1352)
38
effect of Inadequacy of Cause or Lesion (NCC 1355)
Shall not invalidate a contract, unless there has been fraud, mistake, or undue influence.
Lesion is inadequacy of cause, any damage caused by the fact that the price is unjust or inadequate. It is the injury suffered in consequence of inequality of situation, by one party who does not receive the full equivalent for what he gives in a commutative contract, like a sale.
Not an essential element of the cause.
39
exception to the rule that Inadequacy of Cause or Lesion Shall not invalidate a contract?
If it can be established that the lesion or inadequacy of the cause was due to fraud, mistake or undue influence, such fact will render the contract voidable.
The party who has suffered the lesion or damage is not left without a remedy. There is always the possibility that the contract may be rescissible in accordance with the provisions of NCC 1381, in which case he can file an action for rescission.
Those which are entered into by guardians whenever the wards they represent suffer lesion by more than one-fourth of the value of the things which are the objects thereof.”
Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the preceding number.
Partition among co-heirs, when any of them received things with a value less by at least one-fourth than the share to which he is entitled. (NCC 1098).
40
FORM OF CONTRACTS
The manner in which a contract is executed or manifested.
41
does a contract need to be contained in a single writing?
no, it may be collected from different writings which do not conflict with each other and which when connected, show the parties, subject matter, terms and consideration, as in contracts entered into by correspondence.
A contract may be encompassed in several instruments even though every instrument is not signed by the parties since it is sufficient if the unsigned instruments are clearly identified or referred to and made part of the signed instrument or instruments.
42
is a written agreement of which there are two copies, but only one is signed by each of the parties binding?
yes, a written agreement of which there are two copies, one signed by each of the parties is binding on both to the same extent as though there had been only one copy of the agreement and both had signed.
43
KINDS OF CONTRACTS ACCORDING TO FORM
Informal or common contract (general rule)
Formal or solemn contract (exception)
44
Informal or common contract (general rule)
that which may be entered into in whatever form, provided, all the essential requisites for their validity are present. This refers only to consensual contracts, such as the contract of sale. An informal contract may be oral or written.
45
Formal or solemn contract (exception) -
that which is required by law for its efficacy to be in a certain specified form.
46
Antichresis
An agreement by which a debtor gives a creditor the use of real property to be able to pay interest and principal of the debt. The amount of the principal and of the interest shall be specified in writing; otherwise, the contract shall be void (NCC 2134).
47
Must appear in writing.
1. Donations of personal property whose value exceeds five thousand pesos - the donation and the acceptance shall be made in writing; otherwise, it shall be void (NCC 748).
2. Sale of a piece of land or any interest therein through an agent - the authority of the latter shall be in writing; otherwise, the sale shall be void (NCC 1874).
3. Agreements regarding payment of interest in contracts of loan - no interest shall be due unless it has been expressly stipulated in writing. The validity of the contract of loan, however, is not affected (NCC 1956).
4. Antichresis
48
WHAT Must appear in a public document.
Donations of immovable property - the donation must be made in a public document. The acceptance, on the other hand, may be made in the same deed of donation or in a separate public document. If the acceptance is made in a separate public document, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. Noncompliance with any of these formalities shall render the donation void (NCC 749).
Partnerships where immovable property or real rights are contributed to the common fund - it is necessary that the contract must appear in a public instrument and that there must be an inventory of the immovable property or real rights, signed by the partners, and attached to the public instrument; otherwise, the contract is void (NCC 1771 & 1773).
49
WHAT Must be registered.
Chattel mortgages - Personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage (NCC 749).
Sales or transfers of large cattle - According to the Cattle Registration Act, no sale or transfer of large cattle shall be valid unless it is duly registered and a certificate of transfer is secured.
50
Contracts that are unenforceable unless ratified (NCC 1403)
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 that do not comply with the Statute of Frauds as set forth in this number. In the following 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:
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;
d. An agreement for the sale of goods, chattels or things in action, at a price not less than five hundred 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;
e. An agreement for the leasing for a longer period than one year, or for the sale of real property or of an interest therein;
f. A representation as to the credit of a third person.
3. Those where both parties are incapable of giving consent to a contract.
51
Exception to the noncompliance with Statute of Frauds
When the contract is ratified
Partial performance
Acceptance of a benefit (amount to implied ratification)
Example: acceptance of payment
52
reformation
remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties.
In granting reformation, therefore, equity is not really making a new contract for the parties but is conforming and perpetuating the “real contract’’ between them which under the technical rules of law, could not be enforced but for such reformation.
53
PRIMACY OF INTENTION (NCC 1370, 1372)
If the words appear to be contrary to the evident intention of the contracting parties, the intention shall prevail.
The cardinal rule in the interpretation of contracts is to the effect that the intention of the contracting parties should always prevail because their will has the force of law between them.
54
which governs, particular or general intent?
If a particular stipulation is inconsistent with a general one, the particular intent prevails.
55
how to DETERMINE INTENTION (NCC 1371)
Their contemporaneous and subsequent acts shall be principally considered.
1. Relationship of the parties
2. Surrounding circumstances
3. Respective circumstances
4. Purpose and whole tenor of the contract
56
Boiler plate provisions
remaining provisions not contrary to law will be upheld.
57
Rules of Separation
if some stipulations are unlawful, it will be voided, but the valid terms as they can stand can be given effect.
58
When it contains ambiguities and omission of stipulations (NCC 1376)
The usage or custom of the place where the contract was entered into may be received to explain what is doubtful or ambiguous.
59
Do Courts take judicial notice of custom?
Courts take no judicial notice of custom. It is, therefore, necessary to prove the existence of usage or custom like any other fact according to the rules of evidence, the burden of proof being upon the party alleging it.
But usage or custom is not admissible to supersede or vary the plain terms of a contract. That which is agreed upon in a contract is the law between the contracting parties (NCC 1159) provided it is not contrary to law, morals, good customs, public order, or public policy
60
Where custom or usage general in character -
Presumed to be known by the parties, the rule is that such custom or usage may be proved without being specifically pleaded.
61
Where custom or usage local in character -
The party who proposes to rely upon it should aver it in his pleadings, and a local custom or usage applying to a special or particular kind of business may not be proved to explain even the ambiguous terms of a contract, unless the existence of such custom or usage is pleaded.
62
Contracts of adhesion
These contracts are so-called because almost all their provisions have been drafted by one party, and the only participation of the other party is the signing of his signature or his “adhesion’’ thereto on the “take it or leave it’’ basis, without the right to modify it.
63
EXAMPLES OF Contracts of adhesion
1. Contracts of insurance. — The rule in Article 1377 is generally applied to contracts of insurance which are liberally construed in favor of the insured and strictly and most strongly against the insurer, resolving all ambiguities against the latter.
2. Contracts in bills of lading -
3. Contracts between a lawyer and his client. — The rule also applies to a contract of professional services between a lawyer and his client, and rightly so because of the inequality of the situation between an attorney who knows the technicalities of the law on the one hand, and a client who usually is ignorant of the vagaries of the law, on the other hand.
4. Other contracts. — The rule likewise applies to all other contracts where their provisions have been drafted only by one party, usually a corporation.
Thus, a deed of chattel mortgage was held a contract of adhesion
There is no way a prospective credit card holder can object to any onerous provision in a contract containing standard stipulations prepared by a credit card company imposed upon those who seek to avail of its credit services as it is offered on a take-it-or-leave-it basis.
Employment agreements are usually contracts of adhesion
5. Validity. — Contracts of adhesion wherein one party, usually a corporation, imposes a ready made form of contract on the other who, if he accepts, merely affixes his signature or his “adhesion’’ thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing, are not entirely prohibited. These types of contracts are as binding as ordinary contracts (NCC 1306), the reason being the one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent
64
REFORMATION
Remedy in equity 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, inequitable conduct, or accident, the instrument fails to express such agreement or intention.
In reformation of contracts, what is reformed is not the contract itself, but the instrument embodying the contract. It follows that whether the contract has become disadvantageous or not under Article 1267 is irrelevant to reformation.
65
RATIONALE FOR REFORMATION
It would be unjust and inequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the parties.
66
REFORMATION REQUISITES (NCC 1359)
1. Meeting of the minds
2. True intention of the parties is not expressed in the instrument
3. Failure to express true intention due to mistake, fraud, inequitable conduct, or accident.
4. The facts upon which relief by way of reformation of the instrument is sought are put in issue by the pleadings;
5. There is clear and convincing evidence (which is more than mere preponderance of evidence) of the mistake, fraud, inequitable conduct or accident.
6. It must be brought within the proper prescriptive period.
7. The document must not refer to a simple unconditional donation inter vivos (NCC 1366), or to wills (NCC 1366), or to a contract where the real agreement is void. (NCC 1366).
67
REFORMATION DISTINGUISHED FROM ANNULMENT OF CONTRACTS
In reformation, there has been a meeting of the minds of the parties - a contract exists but the written instrument purporting to embody the contract does not express the true intention of the parties by reason of mistake, fraud, inequitable conduct, or accident. In annulment, there has been no meeting of the minds, the consent of one of the parties being vitiated by mistake, etc.
While reformation gives life to a contract upon certain conditions, annulment involves a complete nullification of it.
68
ADMISSIBILITY OF PAROL EVIDENCE
General Rule:
The Court may not allow the introduction of parole evidence to show the real agreement of the parties. Whatever is not found in the text of the agreement should thus be construed as excluded, waived or abandoned.
69
Exception to ADMISSIBILITY OF PAROL EVIDENCE
A party may present evidence to modify, explain or add to the terms of the written agreement.
If he puts in issue in his pleading:
1. An intrinsic ambiguity, mistake, or imperfection in the written agreement;
2. The failure of the written agreement to express the true intent and agreement of the parties;
3. The validity of the written agreement; or
4. The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement (“agreement” includes wills)
70
examples of Inequitable conduct, to warrant relief by way of reformation?
Inequitable conduct has been held to consist in doing acts, or omitting to do acts, which the court finds to be unconscionable.
1. Taking advantage by one party of the other’s illiteracy.
2. Abusing confidence.
3. Concealing what of right should have been disclosed.
4. Drafting or having drafted an instrument contrary to the previous understanding of the parties and making the other party to believe the instrument other than it actually is.
5. Taking advantage of a mistake of the other party, known or suspected at the time of the execution of the instrument.
71
when is Reformation granted?
when the mistake is mutual.
The mistake must be of fact — usually. Therefore, generally an error of law is not enough.
72
Unilateral mistake as basis for reformation.
A unilateral mistake in the making of an agreement, of which the other party is entirely ignorant and to which he in no way contributes, will not affect the agreement or afford ground for its reformation.
In other words, a party to a contract cannot avoid it on the ground that he made a mistake where there has been no misrepresentation, there is no ambiguity in the terms of the contract, and the other party has no notice of such mistake and acts in good faith.
However, unilateral mistake accompanied by other facts (NCC 1362, 1363) may be sufficient.
73
Exceptions to Unilateral mistake
Mistake on one side, fraud or inequitable conduct on the other (NCC 1362).
The right to ask for reformation is granted only to the party who was mistaken in good faith.
Mistake is unilateral but the other party is guilty of concealment (NCC 1363).
Only the party in good faith can ask for reformation.
The concealment of the mistake by the other party constitutes fraud.
On the part of the person drafting the instrument
The court may order the reformation of the instrument if the instrument does not convey the true intention of the parties because of the:
ignorance
lack of skill
bad faith of
the drafter of the instrument
or the clerk
or the typist.
Neither party is responsible for the mistake. Hence, either party may ask for reformation.
Mortgage or pledge stated as a sale.
The reformation of the instrument is proper, otherwise, the true intention of the parties would be frustrated.
Such true intention must prevail for the contract must be complied with in good faith. (NCC 1159)
When any of the circumstances enumerated in the law exists, an instrument purporting to be a sale with right of repurchase shall be presumed to be an equitable mortgage.
The intention of the parties can be judged from their contemporaneous and subsequent acts.
74
WHEN REFORMATION IS NOT ALLOWED (NCC 1366)
1. Simple donations inter vivos wherein no condition is imposed;
2. Will;
3. When the real agreement is void.
75
why is reformation not allowed in Simple donations inter vivos wherein no condition is imposed?
In donation, the act is essentially gratuitous and the donee has, therefore, no just cause for complaint.
However, if the donation is conditional
Reformation may be resorted to so that the real or true conditions intended by the donor might be brought out.
In case the donation is an onerous one, reformation is very much in order inasmuch as in this case, said donation would partake very much of the nature of contracts.
76
why is reformation not allowed in wills?
Upon the death of the testator, the right to reformation is lost.
Like a donation, the making of a will is a strictly personal and a free act which cannot be left to the discretion of a third person (NCC 784).
However, after the death of the testator, errors or imperfections in descriptions may be corrected under NCC 789, but not the manner of property disposal.
Furthermore, a will may be revoked by the testator any time before his death and this right is not subject to waiver or restriction. (NCC 828)
77
WHO MAY ASK FOR REFORMATION (NCC 1368)
1. If the mistake is mutual, either party or his successors in interest;
2. In all other cases:
the injured party;
his heirs and assigns.
78
effect of reformation
retroactive from the time of the execution of the original instrument.
79
Before reformation can be granted, the complaint must allege:
1. that the instrument to be reformed does not express the real agreement or intention of the parties
2. what the real agreement or intention was.
80
Prescriptive Period for Reformation of a Contract
The period of prescription for the reformation of a contract (such as one ostensibly an absolute sale but actually a mortgage) is ten (10) years.
81
what are RESCISSIBLE CONTRACTS
Valid until rescinded; a contract that has caused a particular damage to one of the parties or to a third person, and which for equitable reasons may be set aside even if it is valid.
82
May the action for rescission prescribe?
Yes.
82
Is rescission susceptible of ratification?
no
83
who may assail?
not only by a contracting party but even by a third person who is prejudiced or damaged by the contract.
84
may rescission be assailed collaterally?
directly only
85
what are VOIDABLE OR ANNULLABLE CONTRACTS (contratos anulables)
Valid till annulled; a contract in which the consent of one party is defective, either because of want of capacity or because it is vitiated
86
can there be annulment of contract if there has been ratification?
no,
87
what are UNENFORCEABLE CONTRACTS
Cannot be enforced by a proper action in court, unless it is ratified in the manner provided by law.
In a way, it may be considered as a validable transaction, that is, it has no effect now, but it may be effective upon ratification.
88
what are VOID OR INEXISTENT CONTRACTS?
An absolute nullity and produces no effect, as if it had never been executed or entered into.
89
can void contracts be ratified?
no.
90
may void contracts be assailed by a third person whose interest is directly affected?
yes and contracting parties
91
what are RELATIVELY INEFFECTIVE CONTRACTS?
Contracts which are ineffective only with respect to certain parties
But are effective as to other persons.
92
how is a relatively ineffective contract is distinguished from the voidable contract ?
its ineffectiveness, with respect to the party concerned, is produced ipso jure, while a voidable contract does not become inoperative unless an action to annul it is instituted and allowed.
93
how does a relatively ineffective contract differ from the void or inexistent contract?
the ineffectiveness of the latter is absolute, because it cannot be ratified, while the relatively ineffective contract can be made completely effective by the consent of the person as to whom it is ineffective, or by the cessation of the impediment which prevents its complete effectiveness.
94
what are RESCISSIBLE CONTRACTS?
A contract that has caused a particular damage to one of the parties or to a third person, and which for equitable reasons may be set aside even if it is valid.
There is a sort of extrinsic defect consisting of an economic damage or lesion.
95
it is a remedy granted by law to the contracting parties both to contracting parties and to third persons in order to secure reparation of damages caused them by a contract, even if the contract be valid, by means of the restoration of things to their condition prior to the celebration of said contract.
RESCISSIBLE CONTRACTS
96
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.
CONTRACTS WHICH CAUSE LESION OR ECONOMIC DAMAGE (NCC 1381 (1,2), 1098)
97
what must a guardian first do in order to dispose of property of ward?
he must first secure approval of guardianship court
98
what is lesion
injury which one of the parties suffers by virtue of a contract which is disadvantageous for him. To give rise to rescission, lesion must be known or could have been known at the time of making the contract, and not due to circumstances subsequent thereto or unknown to the parties.
99
can rescission take place if the contracts have been approved by the court.
no
100
does lesion invalidate a contract?
not
101
what are the REQUISITES of lesion?
The contract must have been entered into by a guardian in behalf of his ward or by a legal representative in behalf of an absentee;
The ward or absentee must have suffered lesion of more than one-fourth of the value of the property which is the object of the contract;
The contract must have been entered into without judicial approval;
There must be no other legal means for obtaining reparation for the lesion;
The person bringing the action must be able to return whatever he may be obliged to restore; and
The object of the contract must not be legally in the possession of a third person who did not act in bad faith.
102
these are Executed with intention to prejudice rights of creditors; should not be confused with those entered into without such intention, even if some particular damage may be caused to a creditor.
CONTRACTS WHICH DEFRAUD CREDITORS (NCC 1381(3) , 1177, 1313)
103
what are the REQUISITES for CONTRACTS WHICH DEFRAUD CREDITORS?
1. There must be a credit existing prior to the celebration of the contract;
2. There must be a fraud, or at least, the intent to commit fraud to the prejudice of the creditor seeking the rescission;
3. The creditor cannot in any other legal manner collect his credit; and
4. The object of the contract must not be legally in the possession of a third person who did not act in bad faith.
104
what is the
PRESUMPTION OF FRAUD ?
The general rule is that fraud is not presumed. As fraud is criminal in nature, it must be proved by clear and preponderance of evidence.
105
these are presumed fraudulent when the donor did not reserve sufficient property to pay all debts contracted before the donation.
Alienation by gratuitous title
106
these are presumed fraudulent when made by persons against whom some judgment has been rendered in any instance or some writ of attachment has been issued.
Alienations by onerous title
107
this means simple knowledge by the debtor that his act would cause injury to his creditors is enough.
Gratuitous alienations
108
necessary that he be motivated by an intention to prejudice them. Remedy of rescission may be availed of by a third person
Onerous alienations
109
is Good faith of the transferee a defense in onerous transfers?
yes. Where the claim of the plaintiff in the pending litigation has not been registered, and there is nothing in the register of deeds showing any legal obstacles to the transfer, the transferee of a property in litigation, who acquires the same in good faith and for valuable consideration, without knowledge or notice of the litigation or claim of the plaintiff cannot be deprived of such property by a rescissory action. The good faith of the transferee protects him. But where the transferee knew of the claim of the plaintiff, either actually or constructively (through a notice of lis pendens) he acts in bad faith, and the transfer can be rescinded.
110
is Good faith of the transferee material in gratuitous transfers?
immaterial. if the transfer is gratuitous, the transferee loses nothing by the rescission, and the contract may be rescinded even if he acted in good faith. The right of the plaintiff being prior to his, the former should prevail as it causes no injury to the transferee.
111
REQUISITES FOR ACCION PAULIANA:
1. Plaintiff asking for rescission has a credit prior to the alienation, although demandable later.
2. Debtor has made a subsequent contract conveying a patrimonial benefit to a third person
3. Creditor has no other legal remedy to satisfy his claim, but would benefit by the rescission of the conveyance to the third person
a. favorable judgment
b. levy on properties
c. accion subrogatoria
4. Act being impugned is fraudulent
5. Third person who received the property conveyed, if by onerous title, has been an accomplice in the fraud.
112
at the time of accion pauliana, must the credit already be due?
yes. Credit must be existing at the time of the fraudulent alienation, although not yet due. But at the time of accion pauliana, the credit must already be due because it presupposes a judgment and unsatisfied execution which cannot exist when the debt is not yet demandable at the time the rescissory action is brought.
113
is credit prior or after alienation?
prior.
GENERAL RULE:
Credit is prior to the alienation
EXCEPTION:
1. Credit is after alienation but entitled to accion pauliana:
2. When debtor purposely and in bad faith deprives himself of the ability to meet the consequences of obligations he intends to incur in the future; alienation made precisely in view of such future obligation
3. When a party appears to have become a creditor after the alienation, but who may be considered as having a prior right.
4. Claims were acknowledged by the debtor after alienation, but origin of which antedated the alienation.
5. Those who become subrogated, after the alienation, in the rights of a creditor whose credits were prior to the alienation.
114
TEST OF FRAUD
Whether the conveyance was a bona fide transaction or a trick and contrivance to defeat creditors or whether it conserves to the debtor a special right; founded on good consideration or is made with bona fide intent. " Does it prejudice the right of creditors?"
115
in the test of fraud, is it sufficient that it is founded on good consideration, or is made with bona fide intent?
it must have both elements.
116
Quasi-delict
act or omission giving rise to liability to indemnify must be prior to the alienation, even if judgment declaring it be rendered afterwards
117
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.
THINGS IN LITIGATION (NCC 1381 (4))
118
IN THINGS IN LITIGATION (NCC 1381 (4)) Plaintiff may protect his right by filing a notice of
1. lis pendens (real property)
2. issuance of an order of attachment (personal property)
3. appointment of a receiver to place the property in custodia legis (Paras)
119
Insolvency
Refers to the financial situation of the debtor by virtue of which it is impossible for him to fulfill his obligations. A judicial declaration of insolvency is not, therefore, necessary.
120
PAYMENTS MADE IN A STATE OF INSOLVENCY (NCC 1382) REQUISITES
1. That it must have been made in a state of insolvency, and
2. that the obligation must have been one which the debtor could not be compelled to pay at the time such payment was effected.
121
IS a judicial declaration of insolvency necessary?
no
122
is good faith of the transferee a defense in onerous transfers?
yes. Where the claim of the plaintiff in the pending litigation has not been registered, and there is nothing in the register of deeds showing any legal obstacles to the transfer, the transferee of a property in litigation, who acquires the same in good faith and for valuable consideration, without knowledge or notice of the litigation or claim of the plaintiff cannot be deprived of such property by a rescissory action. The good faith of the transferee protects him. But where the transferee knew of the claim of the plaintiff, either actually or constructively (through a notice of lis pedens) he acts in bad faith, and the transfer can be rescinded.
123
is good faith of the transferee material in gratuitous transfers?
If the transfer is gratuitous, the transferee loses nothing by the rescission, and the contract may be rescinded even if he acted in good faith. The right of the plaintiff being prior to his, the former should prevail as it causes no injury to the transferee.
124
ALL OTHER CONTRACTS SPECIALLY DECLARED BY LAW TO BE SUBJECT TO RESCISSION.
RA 10143 - Read also on sections 58, 59, 127
NCC 1382 - Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not be compelled at the time they were effected, are also rescissible.
NCC 1098 - A partition, judicial or extra-judicial, may also be rescinded on account of lesion, when any one of the co-heirs received things whose value is less, by at least one-fourth, than the share to which he is entitled, considering the value of the things.
NCC 1470 - Gross inadequacy of price does 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 other act or contract at the time they were adjudicated.
NCC 1659 - If the lessor or the lessee should not comply with the obligations set forth in articles 1654 and 1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages, or only the latter, allowing the contract to remain in force.
NCC 1189 - When the conditions have been imposed with the intention of suspending the efficacy of an obligation to give, and the thing deteriorates through the fault of the debtor, the creditor may choose between the rescission of the obligation and its fulfillment, with indemnity for damages in either case.
NCC 1526 and 1534 - Right of the unpaid seller of goods to rescind, notwithstanding that the ownership in the goods may have passed to the buyer.
NCC 1539 - Buyer of real estate may rescind when the inferior value of the thing sold exceeds one- tenth of the price agreed upon. Also, if the vendee would not have bought the immovable had he known of its smaller area of inferior quality, he may rescind the sale.
NCC 1542, 1556, 1560, 1567.
125
RIGHT OF FIRST REFUSAL
means identity of terms and conditions to be offered to the lessee and all other prospective buyers.
126
is a contract of sale entered into in violation of a right of first refusal of another person rescissible?
yes
127
If the damage is repaired, as in the case of lesion suffered by the ward or absentee, can rescission take place?
no
128
is contract valid before rescission?
Until they are rescinded, they are legally effective and can convey title.
129
WHO CAN FILE FOR RESCISSION
1. The person who is prejudiced, such as the party suffering the lesion in rescissory actions on the ground of lesion, the creditor who is defrauded in rescissory actions on the ground of fraud, and other persons authorized to exercise the same in other rescissory actions;
2. their representatives;
3. their heirs; and
4. their creditors by virtue of the subrogatory action defined in NCC 1177 of the Code.
130
RESCISSION IN NCC 1191
1. is based on non-performance or non-fulfillment of the obligation
2. the action may be instituted only by the injured party to the contract
3. in some cases, the courts may grant a term
4. non-performance by the other party is important
5. prescribes in 10 years
131
rescission UNDER NCC 1380
1. based on lesion or fraud upon creditors
2. the action is instituted by either of the contracting parties or by third persons
3. the courts cannot grant a period or term within which to comply
4. non-performance by the other party is immaterial
5. prescribes in 4 years
132
1191 DISTINGUISHED FROM RESCISSION BY MUTUAL CONSENT
Neither must rescission be confused with rescission of a contract by mutual consent of the contracting parties. One must be distinguished from the other — first, with respect to the causes of rescission, second, with respect to the laws applicable, and third, with respect to the effects.
133
Mutual dissent
is an agreement of the parties to cancel their contract and mutually return the object and cause thereof. In mutual withdrawal, it is the will of the parties that constitutes the basis, whereas in rescission (properly called), it is the law that constitutes the basis
134
Rescission requisites
1. The contract must be validly agreed upon (NCC 1380)
2. There must be lesion or pecuniary prejudice or damage to one of the parties or to a third person (NCC 1381)
3. The rescission must be based upon a case especially provided by law (NCC 1380, 1381, 1382)
4. There must be no other legal remedy to obtain reparation for the damage (NCC 1383)
5. The party asking for rescission must be able to return what he is obliged to restore by reason of the contract (NCC 1385)
6. The object of the contract must not legally be in the possession of third persons who did not act in bad faith
7. The period for filing the action for rescission must not have prescribed. (NCC 1389)
135
is the action for rescission subsidiary?
yes, it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. Hence, before a party who is prejudiced can avail himself of this remedy, it is essential that he has exhausted all of the other legal means to obtain reparation.
136
Can the remedy of rescission be availed of if the party who demands rescission cannot return what he is obliged to restore under the contract?
no. Mutual restitution is required in rescission and this presupposes that both parties may be restored to their original situation.
137
is the paragraph of NCC 1385 applicable to rescissory actions on the ground of lesion and to rescissory actions on the ground of fraud? no,
no, The paragraph of NCC 1385 is applicable only to rescissory actions on the ground of lesion and not to rescissory actions on the ground of fraud. This is so because in the latter there can certainly be no obligation on the part of the plaintiff-creditor to restore anything since he has not received anything.
138
If the alienation is gratuitous and not by onerous title (NCC 1387), can the transferee invoke good faith?
no, otherwise, he would enrich himself at the expense of the creditor.
139
DATE OF RECKONING RESCISSION
1. From the date the contract was entered into and all legal remedies have been exhausted.
2. For minors — Within four years after attaining the age of majority and all other legal remedies have been exhausted
3. For absentees — when he learns of the contract (when his domicile is known) and all legal remedies have been exhausted
4. For contracts in fraud of creditors — From the time the fraud is discovered and all other legal remedies have been exhausted
5. Things in litigation — after knowledge of the transaction and all other legal remedies have been exhausted.
140
Under NCC 1191, action for rescission by the buyer must be commenced within how many years?
four (4) years from the date the judgment becomes final and executory.
141
purpose of rescission
to place the parties as far as practicable in their original situation, that is, the parties are restored to the status quo ante.
142
When the court declares a contract rescinded, the parties must return to each other :
1. the object of the contract with its fruits and
2. the price thereof with legal interest.
143
for the party seeking rescission, can they ask performance as to part and rescission as to remainder?
no, When a rescission is granted, it has the effect of abrogating the contract in all respects.
144
may rescission take place when the thing which constitutes the object of the contract is legally in the possession of a third person who did not act in bad faith?
no. It has been held that a third person to whom the realty has been transferred who has not registered his right in the proper registry cannot be protected against the effects of a judgment rendered in the action for rescission.
The person who is prejudiced is not left without any remedy. He may still bring an action for indemnity for damages against the person who caused the loss.
145
As to third persons who acquired thing in good faith (Art. 1385 [2] and [3]) rescission requisites
1. the thing must be legally in the possession of the third person; and
2. that such third person must not have acted in bad faith.
146
“Bad Faith”
state of mind affirmatively operating with furtive design or with some motive or self-interest or ill-will or for an ulterior purpose, and implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.
147
If it happens that there are two or more alienations, the who shall be liable first?
If it happens that there are two or more alienations, the first acquirer shall be liable first, and so on successively.
148
what shall be the EXTENT OF RESCISSION (NCC 1384)
Rescission shall be only to the extent necessary to cover the damages caused.
Paras — NCC 1384 makes partial rescission a possibility, since after all, the only purpose of rescission is to repair or cover the damages caused. Complete rescission will not therefore be allowed, if it is not justified by the circumstances of the case. Insofar as it is not rescinded, the alienation is valid.
The rescission shall only be to the extent of the creditor’s unsatisfied credit. The policy of the law is to preserve or respect the contract, not to extinguish it.
149
who benefits from rescission?
rescission is only in favour of the plaintiff-creditor, and not all the creditors. Only the creditor who has asked for rescission, not the other creditors, benefits from the rescission.
The extent of revocation is only to the amount of the prejudice suffered by the creditor. As to the excess, the alienation is maintained.
Thus, when a debtor has sold all his properties in fraud of creditors, the rescission can be applied only to such as may be necessary to cover the credit. And if the transferee is willing to pay the amount of such credit, rescission will not lie.
150
BADGES OF FRAUD (NCC 1387)
1. The fact that the consideration of the conveyance is fictitious or inadequate;
2. A transfer made by a debtor after suit has been begun and while it is pending against him;
3. A sale upon credit by an insolvent debtor;
4. The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly embarrassed financially;
5. Evidence of large indebtedness or complete insolvency;
6. The fact that the transfer is made between father and son (when this fact is considered together with preceding circumstances);
7. The failure of the vendee to take exclusive possession of all the property.
151
what are VOIDABLE OR ANNULLABLE CONTRACTS
Those in which all of the essential elements for validity are present, although the element of consent is vitiated either by lack of legal capacity of one of the contracting parties, or by mistake, violence, intimidation, undue influence, or fraud.
152
in voidable contracts, can their defect or voidable character cannot be invoked by third persons?
no.
153
VOIDABLE DISTINGUISHED FROM RESCISSIBLE CONTRACTS
1. In a voidable contract the defect is intrinsic because it consists of a vice which vitiates consent, while in a rescissible contract the defect is external because it consists of damage or prejudice either to one of the contracting parties or to a third person.
2. In the former the contract is voidable even if there is no damage or prejudice, while in the latter the contract is not rescissible if there is no damage or prejudice.
3. In the former the annulability of the contract is based on the law, while in the latter the rescissibility of the contract is based on equity. Hence, annulment is not only a remedy but a sanction, while rescission is a mere remedy. Public interest, therefore, predominates in the first, while private interest predominates in the second.
4. The causes for annulment are different from the causes for rescission.
5. The former is susceptible of ratification, while the latter is not.
6. Annulment may be invoked only by a contracting party, while rescission may be invoked either by a contracting party or by a third person who is prejudiced.
154
ANNULLABLE CONTRACTS REQUISITES
1. consent must be manifested by the concurrence of the offer and the acceptance (Arts. 1319-1326);
2. the contracting parties must possess the necessary legal capacity (Arts. 1327-1327);
3. the consent must be intelligent, free, spontaneous, and real (Arts.1330-1346
155
KINDS OF VOIDABLE CONTRACTS
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.
156
CHARACTERISTICS VOIDABLE CONTRACTS
a. There is a defect in consent of one of the contracting parties
Either through vitiation or lack of legal capacity.
b. Binding until annulled by a competent court
They are existent, valid and obligatory between the parties unless annulled or set aside by a proper action in court.
c. May be validated by ratification or prescription
Once ratified, voidable contracts become absolutely valid and can no longer be annulled.
157
WHAT'S ANNULMENT
A remedy as well as a sanction provided by law, for reason of public interest, for the declaration of the inefficacy of a contract based on a defect or vice in the consent of one of the contracting parties in order to restore them to their original position in which they were before the contract was executed.
158
GROUNDS FOR VOIDABLE
1. Legal incapacity to give consent, where one of the parties is incapable of giving consent to the contract; or
2. Vitiation of consent, where the vitiation is done by mistake, violence, intimidation, undue influence, or fraud.
159
WHO MAY OR MAY NOT INSTITUTE ACTION FOR ANNULMENT (NCC 1397)
1. The plaintiff must have an interest in the contract; and Real party-in-interest are those who
A. are parties to the contract, or
B. are bound either principally or subsidiarily, or
C. are prejudiced in their rights with respect to one of the contracting parties. (Kilosbayan, Inc. v Morato)
2. The successors-in-interest of a party to a voidable contract may sue for the annulment of the contract. (Descutido v Balthazar)
A. The victim and not the guilty party or the party responsible for the defect is the person who must assert the same.
B. Guilty party, including his successors-in-interest, cannot ask for annulment. This rule is based on the principle that he who comes to court must do so with clean hands.
160
The right of a minor to rescind, upon attaining his majority, a contract entered into during his minority is subject to the conditions:
1. that the election to rescind must be made within a reasonable time after attaining majority
2. that all of the consideration which was in the minor’s possession upon his reaching majority must be returned. The disposal of any part of the consideration after the attainment of majority imports an affirmance or ratification of the contract.
161
PARTIES WHO CANNOT INSTITUTE ACTION
1. Persons without material interest in contract - One who is not a party to the contract or an assignee thereunder, or does not represent those who took part therein
2. Creditors of victim or aggrieved party - UNLESS they are prejudiced in their rights with respect to one of the contracting parties, and can show detriment which would positively result to them from the contract in question (in such cases, they can file an action for annulment)
3. Plaintiffs in a representative suit
4. Minor who misrepresents his age and the other party is misled as to his age - because of estoppel.
162
PRESCRIPTION (NCC 1391) VOIDABLE CONTRACTS
Must be brought within 4 years.
163
if the period of prescription has already expired, can the nullity of the contract can be set up as a defense to an action to enforce the same?
no. Extinctive prescription applies not only to the action for annulment, but also to the defense of nullity. Hence, if the period of prescription has already expired, the nullity of the contract can no longer be set up as a defense to an action to enforce the same.
164
is direct action necessary to annul a voidable contract?
yes, Direct court action is necessary to annul a voidable contract, and until annulled or set aside by the court, a party cannot relieve himself from the obligations arising therefrom.
165
may a voidable contract be attacked indirectly or collaterally?
yes. A voidable contract, like unenforceable and void contracts, may be attacked indirectly or collaterally by way of defense to an action under the contract. (De Leon)
166
voidable contract RECKONING PERIOD In case of intimidation, violence, or undue influence
From the time the intimidation, etc. ceases.
Reason: Because before the time the vitiation ceases, the consent is still being vitiated, thus, the victim cannot be expected to bring an action in court.
167
voidable contract RECKONING PERIOD
In case of mistake or fraud
From the time it is discovered.
Reason: Because before the time of discovery, the innocent party is unaware of the reason which renders the contract voidable and cannot be expected to bring an action in court.
168
voidable contract RECKONING PERIOD Time for reckoning discovery of fraud
a. Reckoned to have taken place from the execution of the contract if there is an allegation that it did not reflect the true intention of the parties
b. From the registration of the alleged fraudulent document with the assessor’s office for the purpose of transferring the tax declaration
c. From the time the document was registered in the office of the register of deeds, for the familiar rule is that registration is a notice to the whole word
169
voidable contract RECKONING PERIOD In case entered into by minors or other incapacitated persons
From the time guardianship ceases.
Guardianship ceases when minor reaches the age of majority
Reason: Because an incapacitated person has no capacity to sue.
170
EFFECT: MUTUAL RESTITUTION (NCC 1398 and 1402)
Obligations to give
The 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.
171
EFFECT: MUTUAL RESTITUTION (NCC 1398 and 1402)
Obligations to do or not to do
There will have to be an apportionment of damages based on the value of such prestation with corresponding interests.
In other words, upon annulment the contracting parties should be restored to their original position by mutual restitution.
172
The incapacitated person is not obliged to make any restitution
Exception:
insofar as he has been benefited by the thing or price received by him
173
incapacity BURDEN OF EVIDENCE
Upon the person who has capacity.
It is sufficient if there has been a prudent and beneficial use by the incapacitated person.
Sufficient that the incapacitated person kept the thing or amount.
In order to determine this, it is necessary to know his necessities, his social position as well as his duties as a consequence thereof to others.
Thus, such benefit is present if the thing received is used for food, clothing, shelter, health, and others of a similar character.
174
When the thing is lost through the fault of the party obliged to return the same (NCC 1400) does the loss extinguish the action for annulment?
He shall return the fruits received and the value of the thing at the time of the loss, with interest from the same date.
The loss shall not, therefore, extinguish the action for annulment. The only difference from an ordinary action for annulment is that, instead of being compelled to restore the thing, the defendant can only be compelled to pay the value thereof at the time of the loss.
175
effect of the loss of the object of the contract through a fortuitous event upon the right to ask for the annulment of the contract.
Unfortunately, the Code does not provide for the effect of the loss of the object of the contract through a fortuitous event.
possible to apply the general principles regarding the effects of fortuitous events to any problem that may arise. The contract can still be annulled, but with this difference:
Loss through defendant
The defendant can be held liable only for the value of the thing at the time of the loss, but without interest thereon.
The defendant, and not the plaintiff, must suffer the loss because he was still the owner of the thing at the time of the loss; he should, therefore, pay the value of the thing, but not the interest thereon because the loss was not due to his fault.
Loss through plaintiff
Plaintiff must pay to the defendant the value of the thing at the time of the loss, but without interest thereon.
According to Dr. Tolentino, otherwise, we would arrive at the absurd conclusion that an action for annulment would in effect be extinguished by the loss of the thing through a fortuitous event.
If the party who lost the thing through a fortuitous event offers to pay its value with the fruits received if any
There is no liability to pay interest since the loss is without his fault, and the other can be required to make restitution.
176
EXTINGUISHMENT OF ACTION FOR ANNULMENT how
i. by ratification (NCC 1392)
ii. When the thing is lost through the fault of the person who has the right to file the action (NCC 1401)
There is no more obligation to return such thing.
The other cannot be compelled to restore what in virtue of the decree of annulment he is bound to return (NCC 1402).
177
what's RATIFICATION
the act or means by virtue of which efficacy is given to a contract which suffers from a vice of curable nullity.
178
does annulment retroact to the time the sale was made?
The effects of an annulment operate prospectively and do not, as a rule, retroact to the time the sale was made.
179
what's Confirmation
term used to refer to the act by which an unauthorized contract is approved by the person in whose name it was entered into. It tends to cure a vice of nullity.
180
what's Recognition
act whereby a defect of proof is remedied, such as when an oral contract falling under the Statute of Frauds is put in writing. It is merely to cure a defect of proof.
181
requisites RATIFICATION
1. The contract must be a voidable one.
2. The person ratifying must know the reason for the contract being voidable (that is, the cause must be known).
3. The cause must not exist or continue to exist anymore at the time of ratification.
4. The ratification must have been made expressly or by an act implying a waiver of the action to annul.
5. The person ratifying must be the injured party.
182
is the guilty party’s consent needed for ratification of a contract?
The guilty party’s consent is not needed; otherwise, he may find a way of getting out of the contract by the simple expedient of refusing to ratify.
183
At the time of ratification, must the cause for nullity already ceased to exist?
yes, Otherwise the act of confirmation would also suffer from the very vice or defect which it seeks to cure.
It must be observed, however, that in the case of contracts entered into by incapacitated persons, this is not indispensable in a sense, because even while the incapacity continues to exist, the confirmation may be effected by the guardian of the incapacitated person.
184
forms of implied ratification
May take diverse forms, such as by silence or acquiescence; by acts showing adoption or approval of the contract; or by acceptance and retention of benefits flowing therefrom.
The injured party must have executed an act which necessarily implies an intention to waive his right.
185
how to know there's Express ratification
When the ratification is manifested in words or in writing.
186
what does Ratification do?
cleanses the contract from all its defects from the moment it was constituted.
187
exceptions to the general rule that Ratification is merely declaratory of the waiver of the right to ask for annulment. Hence, its effects retroact to the moment when the contract was entered into.
Although there is a retroactive effect, the rights of innocent third persons must not be prejudiced.
