VI. Novation – extinction of an obligation through the creation of a new
one which substitutes it
a.a.Requisites:
i. Previous valid obligation
ii. Agreement to enter new obligation
iii. Extinguishments of old
iv. Creation of new valid obligation
b.b. Must be declared in unequivocal terms
c.c. Or incompatible on every point – Test: Whether
old and new
contract can stand
together each having its own independent
existence
d.d. Substitution of Debtor
i. Expromision – Without the knowledgeor
consent of debtor, at
the
instance of the new debtor
1.1.
Payment by new debtor gives him right
to beneficial
reimbursement
2.2. Insolvency or non fulfillment of obligation
by new debtor
will not
give rise to liability of old debtor
ii. Delegacion – Substitution made at the
instance of old debtor
3.1. Payment by new debtor entitles him
to reimbursement and
subrogation
4.2. Non fulfillment of obligation by new
debtor will not give rise
to liability
of old debtor
5.3. Insolvency of new debtor will revive
action against old
debtor if insolvency was already existing and of
public
knowledge, or known to the debtor when he delegated
his debt
e.e. If new obligation is void, the original one shall
subsists
f.f. If original obligation is void, novation is void;except when
annulment may be claimed only by
debtor or when voidable
acts have been
ratified
g.g. Subrogation – Substitution of Debtor
i. Conventional – By express agreement
of the old creditor,
debtor
and the new creditor
ii. Legal –Without agreement, by
operation of law
1.1.
When creditor pays another creditor who
is preferred, even
without
the debtor’s knowledge
2.2. When a third person, not interested
in the obligation, pays with
the express or tacit
approval of debtor
3.3. When a third person interested inthe fulfillment of obligation
pays, even without
the knowledge of debtor
Definition of a Contract
·
A meeting of the minds
·
Between two persons
·
Whereby one binds himself, with respect to the other
·
To give something or to render some service
Different
phases or stages in the life of a contract
1.1. Preparation – Preliminary to formation
2.2. Perfection – birth of the contract
3.3. Consummation - fulfillment
Essential characteristics
of Contracts
1.1.
Obligatory force – must be complied with in good faith
2.2. Autonomy – parties are free to enter such stipulations,
clauses,
terms and conditions
–
Clauses and conditions must not be contrary to:
·
LAW
·
Morals
·
Good Customs
·
Public Order
·
Public Policy
3.3. Mutuality – contract must bind both parties
- Determination can be left to third party,
whose decision shall be
binding only when
communicated to both parties
- Unless such
determination be evidently inequitable
4.4. Relativity – takes effect only bet parties, their assigns andheirs
- Stipulation pour autrui accepted by third
party
- Where third persons comes into possesion of
the object
of contract creating real
rights
- Where contract is to defraud a third person
- Where third person induces a contracting
party to violate his
CONTRACT
a.a.
Different Classes
of Contracts
·
According to perfection
Consensual
– Perfected by mere agreement of the parties
Real – Requires not only consent, but also
the delivery of the object
·
According to form
Common – Do not require particular form
Formal –
Those which require particular form, like donation,
mortgage
·
According to nature of vinculum
Unilateral – Obligation of one party only
Bilateral – Reciprocal obligations for both parties
·
According to cause
Onerous – Giving of
an equivalent or compensation
Gratuitous – Given without compensation, just pure
liberality
·
According to risks involved
Commutative – Prestation is
pecuniarily appreciable and
determined at the moment of celebration of contract
Aleatory – Pecuniarily appreciable but not
yet determined at the
moment
of celebration, since it depends upon the
happening of an uncertain event.
Ex. Insurance
·
According to name
Nominate – with
specific names or designation in law
Innominate – no specific name
Essential
Requisites of Contracts
-
Consent
of the contracting parties
-
Object
certain subject matter of the contract
-
Cause
of the obligation which is established
Elements of Consent
·
Concurrence of the offer and the acceptance
-
Definite
Offer that may be exactly fixed
-
Assent to the terms without qualifications
or conditions
-
Conveyed before the death, civil
interdiction, insanity, or insolvency
-
Qualified acceptance is a counter offer
-
Perfected when acceptance comes to
knowledge of offer or
-
Offer can be withdrawn anytime before
acceptance, unless option is founded on consideration
-
If offer made thru agent, accepted when
communicated to the agent
·
By parties with legal capacity to contract
-
Not minors, insane or demented, deaf-mutes
who do not know how to write, incompetents under guardianship, civil
interdiction
-
Minor can be liable if he misrepresents his
age
-
Prohibited by law from entering into contracts
Husband and Wife to each
other
-
Insolvents
-
Persons prohibited from giving donations
-
Adultery, concubinage
-
In consideration of criminal offense
-
Made to public officer, spouse, by reason of office
-
Persons with fiduciary relations
-
Guardian, for property under his guardianship
-
Agents, for property entrusted to them
-
Executor/administrator
-
Public officers, judges, for property under
their jurisdiction
·
Intelligently, freely given, consciously
- -
- Vices of the will
Mistake - False
notion of a thing or a fact materrial to the contract
: Simple mistake gives rise to
correction
: Render voidable in following cases:
: Mistake as
to object of the contract
-
Identity of
thing, Substance, Condition,
: Quantity only if principal reason
: Mistake of Law
- Will not make it voidable except:
Mutual error as to the legal
effect of an agreement when the
real purpose of the parties is
frustrated
: Mistake as to person
- If such identity or qualification is principal cause of
contract
Violence – Employment of external physical
force, irresistible and
serious to wrest consent
Intimidation – Moral compulsion
to influence another to give his
consent
thru fear of imminent or grave evil
: Force employed must be serious or
irresistible
: Determining cause for the party in
entering into the contract
Undue Influence – Improper
advantage of his power over the will of another depriving the latter
of reasonable freedom of choice
•
Confidential, Family, Spiritual and other relations or
•
Person influenced suffering from mental weakness, ignorant,
financial distress
Fraud – Insidious words
or machinations of one of the contracting parties induced the other to enter
into a contract, which without them he would not have agreed; Failure of one
party to disclose facts to other party when there is a duty to reveal them
Dolo incidente (Incidental Fraud) - committed in the
performance of pre-existing obligation, remedy is damages
Dolo causante (Causal
Fraud) – Fraud employed at the time of the execution of a contract in order to
secure consent, remedy is annulment because of vitiation of consent
-
Must be employed by one of the
contracting parties,
-
but not by both or by third parties
-
Must be Serious
-
Must have induced
the other party to enter into the contract
Vices of Declaration
Simulated Contracts
1 . Absolute
– Contracting
parties do not intend to be bound by the contract at all
–Void
2.
Relative
– Contracting parties conceal their
true intentions
– Real agreement binding on the
parties if it does not prejudice
third person
Objects
·
Thing, right or service which is the subject matter of
the obligation created or established
·
Thing or service must be within the commerce of man
oo The law prohibits future inheritance as object of contract
oo Transmissible and can be appropriated
oo Not contrary to Law Moral Good Conduct Public
Order Public Policy
oo Real or possible
oo Determinate or determinable
Cause
·
Essential
reason why the parties enter into the contract
-
Cause
should be in existence
-
Licit
or lawful
-
True
·
Interchangeable
with consideration, but not same as motive
-
General
rule: Particular motive of the party in entering into a contract are not
material. Except: When it predetermines the purpose of the contract
Form
·
Whatever
may be the form, Contract shall be obligatory on all provided all the essential
requisites are present
·
Two
exceptions:
- When Law
requires a certain form for validity
-
When Law requires form for enforcement
·
Must
appear in Writing to be valid:
-
Donation exceeding P 5,000
-
Sale of piece of land or interest therein by an agent
-
Antichresis - Creditor acquires rights to fruits of immovable
but applying to payment of interest
-
Agreement regarding payment of interest
·
Must appear in Public Instrument to be valid:
-
Donations of immovable property
-
Partnership where immovable or real rights are
contributed
-
Must appear in Public Instrument for Enforcement
-
Creation, transmission, modification, sales or extinguishments
of real rights over immovable properties
-
Cession, repudiation, or renunciation of hereditary rights,
or those of conjugal partnership of gains
-
Power to administer property
-
Cession of actions or rights proceeding from an act appearing
in a public document
Reformation
·
When the true intention of the parties are not expressed
in the instrument, one of the party may ask for the instrument to be changed so
that true intention may be expressed.
·
Requisities
-
Must be a meeting of the minds of the parties
-
True intention is not expressed in the instrument
-
Failure due to mistake, fraud, inequitable conduct or
accident
-
What may be
reformed
-
Mutual mistake of parties cause failure to disclose real
agreements
-
One party mistaken and the other acted fraudulently or
inequitably
-
One party was mistaken and the other knew that instrument
did not state real agreement, yet concealed it
-
Ignorance, lack of skill,, negligence or bad faith on the
part of person drafting it
-
Where parties agree on mortgage, but instrument states
property is sold absolutely or with right to repurchase
·
What may not be reformed
-
Simple Donations with no condition
-
Wills
-
Those where real agreement is void
Defective Contracts
As to defect
Rescissible - Injury or damage
Voidable - Vitiation of consent or legal capacity
Unenforceable - In excess of authority or do not
comply with S of Fraud
Void - Lack of an element of a valid contract
As to effect
Rescissible and Voidable - Valid until annulled
Unenforceable - Cannot be enforced by action in
court
Void - No legal effects at all
As to parties who can file action
Rescissible and Void – May be attack directly By
contracting parties
or by third parties
Voidable and Unenforceable
- Cannot beattacked by third persons
Resolution (Rescission of reciprocal obligation
·
Party who may institute
action
-
For resolution, only
party to the contract
·
Causes
-
Failure of one party to
comply w/ obligation
·
Kind of contract
-
Reciprocal obligation
only
·
Power of the courts
-
Can grant extension for
performance
Rescissible Contracts
·
Guardian who represent
ward, lession of more than ¼of the value of the thing
-
In representation of
absentee, lession of ¼
-
In fraud of creditor who
is unable to collect
-
Things under
litigation, entered into by defendant without approval of litigants and
court
-
Payment made in state of
insolvency where debt not yet due
·
Those which may be declared by law
-
Partition (1098)
-
Result of deterioration
(1189)
-
Unpaid seller (1526 and
1534)
·
Badges of Fraud
-
Cause or consideration is inadequate
-
Transfer made after suit has begun or pending
-
Sale on credit by an insolvent debtor
-
Evidence of large indebtedness or complete
insolvency
-
Transfer of all or nearly all of debtor properties
-
Between father and son, with any of above
circumstances
-
Failure of vendee to take exclusive possession
Voidable Contracts
-
Where one
party is incapable of giving consent to a contract
-
Where the consent is vitiated by mistake, violence,
intimidation, fraud, undue influence
Convalidation
-
Prescription (Four years)
*From time incapacity ceases
*From discovery of
such fraud or mistake
-
Ratification or confirmation
-
Loss of the thing by thru the fault of the person who has
right to annul
Effects of
annulment of Voidable Contract
-
If not consummated, then parties are released from obligation
-
If consummated, parties are to
restore to each other what they have given, with
fruits and interests, plus damages
-
If to do or not to do,
there will be apportionment of damages
-
Incapacitated party not obliged to
make restitution except forwhat he was benefited
Unenforceable
Contracts
-
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 not complying with Statute of Frauds.
Statute of Fraud
·
Purpose is to prevent fraud, not to aid the commission of
fraud
·
Basic and fundamental principles
-
Applies only to executory contracts
-
Cannot apply if action is not for damage bec of violation
of agreement or for specific performance
-
Exclusive
-
May be waived
-
Personal defense
-
Contracts are not void
-
Rule of exclusion
-
Concerns admissibility of evidence, not credibility
-
Does not apply if action is to claim reformation
·
Following must be in writing or in
some notes or memorandum:
-
Agreement not to be performed
within a year from the making thereof
-
A special promise to answer for debt, defaults or
miscarriage of another
-
Agreement in consideration of marriage
-
Sales of goods, chattels, things above P500
-
Lease of more than one year
-
Representation as to credit of another
Void Contracts
– No concurrence of offer/acceptance
– Cause, object, purpose contrary to law, morals, good customs,
public order, or public
policy
– Absolutely simulated or fictitious
– Cause or
object did not exist at the time of
the transaction
– Object outside commerce of men
– Impossible service
– Intention of the parties relative to
principal object cannot be
ascretained
– Prohibited or declared void by law
Estoppel
·
Estoppel in pais - by one’s conduct or
acts, representatioons, admissions or silence, culpable negligience
induces another to believe certain facts to exist and such other
rightfully relies and acts on such belief.
·
Estoppel by Deed - A party to a deed, are precluded
from a asserting against the other party to the deed any right or title in
derogation of the deed, or from denying any material fact asserted therein.
·
Estoppel by Record - A party precluded from denying
the truthof matters set forth in a record, whether judicial or
legislative.
·
Estoppel by Laches
Estoppel by Laches
Failure or
neglect to enforce a right for an
Unreasonable
and unexplained length of time
Despite
knowledge or notice
