Philippine Civil Code – Contracts (Arts. 1291–1368)

Vocabulary flashcards summarizing key terms, doctrines and statutory provisions on Philippine Contract Law (Civil Code, Arts. 1291–1368), including concepts of cause, form, reformation, vitiation of consent, simulation, essential requisites, and allied obligations.

Cause (Cost)

The objective exchange that makes the contract binding—what each party actually gives or gets.

• Must be lawful and stated (or presumed)

Onerous Contract

• Both sides give

• There’s a reciprocal exchange of prestations (things or services) that impose a burden on each side.

Remuneratory Contract

past or present service is compensated

Pure Beneficence

Gratuitous contract motivated solely by liberality of the benefactor (e.g., donation).

Motive

the personal, subjective reason behind why one entered the deal.

Unlawful Cause

Cause contrary to law, morals, good customs, public order or public policy, rendering the contract void.

False Cause

A stated cause that never existed; contract void

unless another true and lawful cause is proved.

Presumed Cause

when no cause is stated → the law presumes it exists & is lawful

unless debtor proves otherwise.

Lesion (Inadequacy of Cause)

Gross undervaluation; does not invalidate a contract

unless accompanied by fraud, mistake or undue influence.

Form Requirement (Art. 1356)

Contracts are valid regardless of form unless the law requires a specific form, which then becomes indispensable.

Right to Compel Form

After perfection, either party may force the other to observe the form required by law.

Public Document

Notarized instrument required for dealings with real rights over immovables, hereditary renunciations, powers to administer, or cession of rights/actions.

Writing Requirement ≥ ₱500

Contracts involving amounts exceeding ₱500 must be in writing to be enforceable.

Reformation

Judicial correction of a written instrument so it expresses the parties’ true agreement.

Drafting Mistake (Art. 1359)

Ground for reformation when drafting errors prevent the instrument from reflecting true intent.

Mutual Mistake

Both parties err about terms so the instrument fails to express agreement; basis for reformation.

Mistake + Bad Faith

One party’s mistake plus the other’s fraud or inequity; injured party may seek reformation.

Concealed Mistake

One party knows the instrument is wrong but hides it; reformation available.

Clerical Error

Mistake from drafter or typist’s ignorance, negligence or bad faith; reformation allowed.

No Reformation Allowed

Simple inter vivos donations without condition, wills, or void agreements cannot be reformed.

Action Bar (Art. 1367)

Party who already enforced the instrument as written may not later sue for its reformation.

Reformation Procedure

May be initiated by either party (if mutual mistake) or the injured party (if unilateral mistake or fraud).

Vitiated consent

Yes wasnt free

1. Mistake

2. Violence

3. Intimidation

4. Undue Influence
   – I exploit a position of power or trust over you to overpower your free will.

5. Fraud

Ratification

Express or implied confirmation that cures the defect of a voidable or unenforceable contract.

Causal Fraud (Dolo Causante)

Fraud that directly causes a party to consent to the contract.; ground for annulment.

Incidental Fraud (Dolo Incidente)

Fraud is not the cause of agreement; does not annul contract but entitles injured party to damages.

Absolute Simulation

Parties intend no binding effect (facade)– contract is void.

Relative Simulation

Contract hides true terms but parties intend to be bound; real agreement is enforceable if lawful.

Violence

Serious or irresistible physical force used to obtain consent, making contract voidable.

Intimidation

Consent obtained through well-grounded fear of imminent grave evil; renders contract voidable.

Undue Influence

Improper advantage of power over another’s will, vitiating consent.

Fraud

Insidious words or machinations inducing a party to contract; may annul if causal.

Failure to Disclose Confidential Facts

Nondisclosure by one with a duty to reveal constitutes fraud.

Trade Exaggerations

Customary sales puffery; not considered fraud when facts are accessible.

Opinion vs. Expert Fraud

Ordinary opinion is not fraud, but a misleading expert opinion relied upon can be fraudulent.

Third-Party Misrepresentation

Deception by a non-party does not vitiate consent unless it causes substantial mutual mistake.

Good-Faith Misrepresentation

False statement honestly believed; not fraud but may constitute mistake.

Serious Fraud Requirement

For fraud to annul, it must be serious and not employed by both parties.

Impossible Object

Things or services impossible to perform cannot be contract objects.

Determinate Object

Object must be at least certain as to kind; quantity may be determined later without new contract.

Real Right

Right enforceable against the world (e.g., ownership, registered mortgage). to something

Real Contract

Contract perfected only by delivery of the object (deposit, pledge, commodatum).

Deposit

hand over a particular thing for safekeeping; legally binding only once exact item has been retrieved

Pledge

Bailment of a movable as security, perfected when the item is delivered to creditor.

Commodatum

Gratuitous loan for use, perfected upon delivery of the item lent.

Unenforceable Contract

Contract made in another’s name without authority; ineffective until ratified.

Offer

Definite proposal specifying object and terms, capable of acceptance.

Acceptance

Unqualified assent to an offer, perfecting the contract.

Qualified Acceptance

Acceptance with modifications; treated as a counter-offer.

Option Contract

Separate agreement giving offeree a period to accept, supported by consideration (option money).

Option Period

Time granted to decide whether to accept an offer; irrevocable if backed by option fee.

Option Money (Earnest) / Option Fee

Payment or promise to lock an option open until a period; forfeited if offeree declines.

Invitation to Offer

Advertisement or announcement inviting negotiations; not a binding offer unless clearly definitive.

Lucid Interval

Temporary sanity during mental illness; contracts made then are valid.

Capacity

Legal ability to consent; unemancipated minors, insane, and illiterate deaf-mutes cannot consent.

Mistake (Art. 1331)

Error regarding substance or principal conditions of the object that vitiates consent.

Known Risk (Art. 1333)

No mistake exists when the party alleging it knew the risk or contingency.

Illiteracy or Language Barrier

Enforcing party must prove terms were fully explained to one who cannot read or understand the language.

Mutual Error of Law

Both parties misunderstand legal effect of their agreement; consent frustrated.

Contract

Moment when offer and acceptance concur on object and cause, perfecting the contract.

Negotiation

Parties discuss terms ; no binding commitment.

Perfection (birth)

Meeting of minds (consent + object + cause)

Consummation (execution)

Stage of complete performance or execution of contractual obligations.

Compensation (Set-off)

Mutual extinguishment of equal debts between two parties.

Subrogation

• “Placed into the shoes of the creditor.”

• A third party (subrogee) steps into creditor’s rights, enjoying and enforcing them.
  

Novation

Total or partial extinction of an old obligation by the creation of a new one.

In-nominate Contract

contract w/ no special, legally‑defined name (unlike “sale” or “lease”), governed by stipulations, customs and law.

Third-Party Determination

Parties may delegate performance details (e.g., price) to a neutral third person, binding unless inequitable.

Stipulation pour autrui

Contractual provision deliberately conferring enforceable benefit on a third person who accepts before revocation.

Subrogee

• Entity that take creditor’s place

Subrogor

• Past creditor

Modes of Novation

1. Change of object/principal conditions

2. Substitution of debtor

3. Substitution of creditor (subrogation of creditor)

Change of object/principal conditions

Old prestation extinguished; new prestation substituted

Substitution of debtor

Original debtor replaced; new debtor assumes obligation.

Substitution of creditor (subrogation of creditor)

– Original creditor replaced; obligation owed to new creditor

Requirements of Substitution of creditor (subrogation of creditor)

• All parties must agree to extinguish old obligation (clear intent) may be writing or orally

• All must consent

Requirements of Substitution w/o original debtor consent (subrogation of debtor w/o consent of orignial debtor)

• clear intent to novate

• All must consent (but original Debtor consent is optional)

Prestation

promised duty or act required in an obligation

Freedom of stipulation

Parties may include any terms they deem convenient, so long as not contrary to:

– Law, morals, good customs, public order/public policy.

📝Freedom on whatever the contract holds

What governs In-nominate Contracts

parties’ stipulations (free agreements)

In in-nominate contracts, validity and compliance cannot be left to the

will of only one party

Article 1309 - Neutral Third Party meaning

Allows a neutral outsider (an appraiser, judge, or expert) decide things like price or value; binded once communicated to both parties

1310 - Third Party “evidently inequitable”

An unfair valuation from a third party can be rejected by either side and brought into court

Who are binded by contracts?

• Parties Involved

  (unless rights/obligations are non-transmissible)

• Their assigns/heirs

Creditor’s heir’s liability is limited to

value of inherited property

Stipulation for Third Person

• if contract clearly (not incidental) mentions a benefit to another party + that other party accepts = other party can enforce"

1312 Contract for real rights

3rd person → comes into possession of the object bound in the contract -> also bound in contract.

1313 Protection for Fraud on Creditors

contract or transfer: main purpose is to defraud existing creditors → voidable at the creditor’s option

Art. 1314 — Inducing Breach

third person → induces another to violate his contract → liable for damages to the other contracting party

1315 Perfection by Consent

Offer + acceptance = binding even before writing.
- perfection of contract = at consent

1316 Real Contracts Perfection

Real contract perfected = delivery of the object is made

Art 1317 - Contract in another’s name

• Unenforceable to the name unless they consent/authorize

  Unless:
  - Ratification is made (saying so outright or by acting as if they accept it (e.g., taking delivery, making payments)

Art 1317 - Contract in another’s name and ratification is made

contract becomes binding and retroactive

Stages of a Contract

• Negotiation

• Perfection (Birth)

• Consummation (Execution)

Art. 1318 Requisites of a Valid Contract

consent of the contracting parties; object certain; cause of the obligation

Art. 1319 — Consent

consent = meeting of the offer + acceptance of thing and cause

Art. 1320–1321 — Time, Place & Manner

How, when, and where is set to be followed
if there is an agent, the agent receiving word of acceptance= the offer is binding

Art. 1322 — Death or Incapacity

before other side says “Yes.” if either the offer‑maker or the offeree:

• Dies,

• Becomes legally interdicted (court‑declared incapable),

• Becomes insane, or

• Becomes insolvent (bankrupt)

→ offer automatically vanishes—there’s nothing left to accept.

Art. 1324 — Option Contracts

offers made with a deadline can still be pulled back anytime a before a “yes”

Unless an option fee is payed

Art. 1325–1326 — Advertisements

Business advertisements = not definite offers = mere invitations to make an offer

unless it appears otherwise