week 10-11 Flashcards
OBJECT
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.
KINDS OF OBJECT
- things (as in sale of property)
- rights (as in assignment of credit)
- services (as in agency)
REQUISITES OF THE OBJECT
- 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).
I. Must be within the commerce of man
Anything that can be legally the subject of commercial transactions.
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.
Future things
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.
Emptio rei speratae (conditional contract)
a conditional sale. There is a suspensive condition. If the future thing does not come into existence, then there is no contract of sale.
Emptio spei (aleatory contract)
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).
V. Must be determinate as to its kind or determinable
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.
Determinable
can be determined with certainty upon delivery of the thing or object.
. WHAT MAY NOT BE OBJECTS OF CONTRACTS (NCC 1347)
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)
I. All things outside the commerce of man
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
WHAT MAY NOT BE OBJECTS OF CONTRACTS (NCC 1347)
II. All intransmissible rights like?
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.
III. Contrary to law, morals, good customs, public order, or public policy
The object must be licit.
IV. Future inheritance, except when authorized by law
Future inheritance (one where the source of property is still alive) cannot be the subject of a contract.
Exceptions to Future inheritance cannot be the subject of a contract.
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)
WHAT MAY NOT BE OBJECTS OF CONTRACTS (NCC 1347)
V. Impossible things or services (NCC 1348) like?
Impossibility must not be confused with difficulty. Hence, a showing of mere inconvenience, unexpected impediments, or increased expenses is not enough.
Absolute impossibility
(objectively impossible; no one can do it) - arises from the very nature or essence of the act or service itself, renders the contract void.
Relative impossibility
(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.
what is CAUSE (CAUSE) NCC 1350
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.
Accessory contracts
the rule is that the cause of the accessory contract is identical with that of the principal contract.
cause DISTINGUISHED FROM CONSIDERATION
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
Motive (psychological)
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.
Cause is
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,
motive
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.
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.
exception to motive General Rule:
The motive may be considered the cause in a contract when such motive predetermines the cause of the contract.
When a motive of a debtor in alienating the property is to defraud his creditors, the alienation is
rescissible.
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.
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.
ESSENTIAL REQUISITES OF CAUSE
- The cause should be in existence at the time of the celebration of the contract.
- The cause should be licit or lawful.
- The cause should be true.
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.
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.
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.
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.
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.
False cause due to simulation
contract is void.
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)
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.
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).
FORM OF CONTRACTS
The manner in which a contract is executed or manifested.
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.
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.
KINDS OF CONTRACTS ACCORDING TO FORM
Informal or common contract (general rule)
Formal or solemn contract (exception)
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.
Formal or solemn contract (exception) -
that which is required by law for its efficacy to be in a certain specified form.
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).
Must appear in writing.
- 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).
- 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).
- 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).
- Antichresis
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).
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.
Contracts that are unenforceable unless ratified (NCC 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;
- 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. - Those where both parties are incapable of giving consent to a contract.
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
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.
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.
which governs, particular or general intent?
If a particular stipulation is inconsistent with a general one, the particular intent prevails.
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
Boiler plate provisions
remaining provisions not contrary to law will be upheld.
Rules of Separation
if some stipulations are unlawful, it will be voided, but the valid terms as they can stand can be given effect.
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.
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
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.
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.
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.
EXAMPLES OF Contracts of adhesion
- 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.
- Contracts in bills of lading -
- 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.
- 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 - 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
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.
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.
REFORMATION REQUISITES (NCC 1359)
- Meeting of the minds
- True intention of the parties is not expressed in the instrument
- Failure to express true intention due to mistake, fraud, inequitable conduct, or accident.
- The facts upon which relief by way of reformation of the instrument is sought are put in issue by the pleadings;
- There is clear and convincing evidence (which is more than mere preponderance of evidence) of the mistake, fraud, inequitable conduct or accident.
- It must be brought within the proper prescriptive period.
- 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).
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.
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.
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)
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.
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.
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.
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.
WHEN REFORMATION IS NOT ALLOWED (NCC 1366)
- Simple donations inter vivos wherein no condition is imposed;
- Will;
- When the real agreement is void.
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.
