Title V.

- PRESCRIPTION
CHAPTER 1
GENERAL PROVISIONS
Art. 1106. By prescription, one acquires
ownership and other real rights through the
lapse of time in the manner and under the
conditions laid down by law.
In the same way, rights and conditions are
lost by prescription. (1930a)
Art. 1107. Persons who are capable of
acquiring property or rights by the other
legal modes may acquire the same by means
of prescription.
Minors and other incapacitated persons may
acquire property or rights by prescription,
either personally or through their parents,
guardians or legal representatives. (1931a)
Art. 1108. Prescription, both acquisitive
and extinctive, runs against:
(1) Minors and other incapacitated
persons who have parents, guardians
or other legal representatives;
(2) Absentees who have
administrators, either appointed by
them before their disappearance, or
appointed by the courts;
(3) Persons living abroad, who have
managers or administrators;
(4) Juridical persons, except the State
and its subdivisions.
Persons who are disqualified from
administering their property have a
right to claim damages from their
legal representatives whose
negligence has been the cause of
prescription. (1932a)
Art. 1109. Prescription does not run
between husband and wife, even though
there be a separation of property agreed

upon in the marriage settlements or by

judicial decree.
Neither does prescription run between
parents and children, during the minority or
insanity of the latter, and between guardian
and ward during the continuance of the
guardianship. (n)
Art. 1110. Prescription, acquisitive and
extinctive, runs in favor of, or against a
married woman. (n)
Art. 1111. Prescription obtained by a coproprietor or a co-owner shall benefit the
others. (1933)
Art. 1112. Persons with capacity to alienate
property may renounce prescription already
obtained, but not the right to prescribe in
the future.
Prescription is deemed to have been tacitly
renounced when the renunciation results
from acts which imply the abandonment of
the right acquired. (1935)
Art. 1113. All things which are within the
commerce of men are susceptible of
prescription, unless otherwise provided.
Property of the State or any of its
subdivisions not patrimonial in character
shall not be the object of prescription.
(1936a)
Art. 1114. Creditors and all other persons
interested in making the prescription
effective may avail themselves thereof
notwithstanding the express or tacit
renunciation by the debtor or proprietor.
(1937)
Art. 1115. The provisions of the present
Title are understood to be without prejudice
to what in this Code or in special laws is

established with respect to specific cases of

prescription. (1938)
Art. 1116. Prescription already running
before the effectivity of this Code shall be
governed by laws previously in force; but if
since the time this Code took effect the
entire period herein required for prescription
should elapse, the present Code shall be
applicable, even though by the former laws a
longer period might be required. (1939)
CHAPTER 2
PRESCRIPTION OF OWNERSHIP & OTHER
REAL RIGHTS
Art. 1117. Acquisitive prescription of
dominion and other real rights may be
ordinary or extraordinary.
Ordinary acquisitive prescription requires
possession of things in good faith and with
just title for the time fixed by law. (1940a)
Art. 1118. Possession has to be in the
concept of an owner, public, peaceful
and uninterrupted. (1941)
Art. 1119. Acts of possessory character
executed in virtue of license or by mere
tolerance of the owner shall not be available
for the purposes of possession. (1942)
Art. 1120. Possession is interrupted for the
purposes of prescription, naturally or
civilly. (1943)
Art. 1121. Possession is naturally
interrupted when through any cause it
should cease for more than one year.
The old possession is not revived if a new
possession should be exercised by the same
adverse claimant. (1944a)

Art. 1122. If the natural interruption is

for only one year or less, the time elapsed
shall be counted in favor of the prescription.
(n)
Art. 1123. Civil interruption is produced
by judicial summons to the possessor.
(1945a)
Art. 1124. Judicial summons shall be
deemed not to have been issued and shall
not give rise to interruption:
(1) If it should be void for lack of legal
solemnities;
(2) If the plaintiff should desist
from the complaint or should allow
the proceedings to lapse;
(3) If the possessor should be
absolved from the complaint.
In all these cases, the period of the
interruption shall be counted for the
prescription. (1946a)
Art. 1125. Any express or tacit recognition
which the possessor may make of the
owner's right also interrupts possession.
(1948)
Art. 1126. Against a title recorded in the
Registry of Property, ordinary prescription of
ownership or real rights shall not take place
to the prejudice of a third person, except in
virtue of another title also recorded; and the
time shall begin to run from the recording of
the latter.
As to lands registered under the Land
Registration Act, the provisions of that
special law shall govern. (1949a)
Art. 1127. The good faith of the
possessor consists in the reasonable belief
that the person from whom he received the
thing was the owner thereof, and could
transmit his ownership. (1950a)

Art. 1128. The conditions of good faith

required for possession in Articles 526, 527,
528, and 529 of this Code are likewise
necessary for the determination of good faith
in the prescription of ownership and other
real rights. (1951)
Art. 1129. For the purposes of prescription,
there is just title when the adverse claimant
came into possession of the property
through one of the modes recognized by law
for the acquisition of ownership or other real
rights, but the grantor was not the owner or
could not transmit any right. (n)
Art. 1130. The title for prescription must be
true and valid. (1953)
Art. 1131. For the purposes of prescription,
just title must be proved; it is never
presumed. (1954a)
Art. 1132. The ownership of movables
prescribes through uninterrupted possession
for (4) years in good faith.
The ownership of personal property also
prescribes through uninterrupted possession
for (8) years, without need of any other
condition.
With regard to the right of the owner to
recover personal property lost or of which he
has been illegally deprived, as well as with
respect to movables acquired in a public
sale, fair, or market, or from a merchant's
store the provisions of Articles 559 and 1505
of this Code shall be observed. (1955a)
Art. 1133. Movables possessed through a
crime can never be acquired through
prescription by the offender. (1956a)
Art. 1134. Ownership and other real rights
over immovable property are acquired by
ordinary prescription through possession of
(10) years. (1957a)

Art. 1135. In case the adverse claimant

possesses by mistake an area greater, or
less than that expressed in his title,
prescription shall be based on the
possession. (n)
Art. 1136. Possession in wartime, when the
civil courts are not open, shall not be
counted in favor of the adverse claimant.
Art. 1137. Ownership and other real rights
over immovables also prescribe through
uninterrupted adverse possession thereof for
(30) years, without need of title or of good
faith. (1959a)
Art. 1138. In the computation of time
necessary for prescription the following
rules shall be observed:
(1) The present possessor may
complete the period necessary for
prescription by tacking his possession
to that of his grantor or predecessor in
interest;
(2) It is presumed that the present
possessor who was also the possessor
at a previous time, has continued to
be in possession during the
intervening time, unless there is proof
to the contrary;
(3) The first day shall be excluded and
the last day included. (1960a)
CHAPTER 3
PRESCRIPTION OF ACTIONS
Art. 1139. Actions prescribe by the mere
lapse of time fixed by law. (1961)
Art. 1140. Actions to recover movables
shall prescribe eight years from the time the
possession thereof is lost, unless the
possessor has acquired the ownership by
prescription for a less period, according to

Articles 1132, and without prejudice to the

provisions of Articles 559, 1505, and 1133.
(1962a)
Art. 1141. Real actions over immovables
prescribe after thirty years.
This provision is without prejudice to what is
established for the acquisition of ownership
and other real rights by prescription. (1963)
Art. 1142. A mortgage action prescribes
after ten years. (1964a)
Art. 1143. The following rights, among
others specified elsewhere in this Code, are
not extinguished by prescription:
(1) To demand a right of way,
regulated in Article 649;
(2) To bring an action to abate a public
or private nuisance. (n)
Art. 1144. The following actions must be
brought within ten years from the time the
right of action accrues:
(1) Upon a written contract;
(2) Upon an obligation created by law;
(3) Upon a judgment. (n)
Art. 1145. The following actions must be
commenced within six years:
(1) Upon an oral contract;
(2) Upon a quasi-contract. (n)
Art. 1146. The following actions must be
instituted within four years:
(1) Upon an injury to the rights of the
plaintiff;
(2) Upon a quasi-delict;
However, when the action arises from or out
of any act, activity, or conduct of any public
officer involving the exercise of powers or
authority arising from Martial Law including
the arrest, detention and/or trial of the
plaintiff, the same must be brought within

one (1) year. (As amended by PD No. 1755,

Dec. 24, 1980.)

when said result was recognized by

agreement of the interested parties. (1972)

Art. 1147. The following actions must be

filed within one year:
(1) For forcible entry and detainer;
(2) For defamation. (n)

Art. 1154. The period during which the

obligee was prevented by a fortuitous event
from enforcing his right is not reckoned
against him. (n)

Art. 1148. The limitations of action

mentioned in Articles 1140 to 1142, and
1144 to 1147 are without prejudice to those
specified in other parts of this Code, in the
Code of Commerce, and in special laws. (n)

Art. 1155. The prescription of actions is

interrupted when they are filed before the
court, when there is a written extrajudicial
demand by the creditors, and when there is
any written acknowledgment of the debt by
the debtor. (1973a)
BOOK IV
OBLIGATIONS AND CONTRACTS
Title. I. - OBLIGATIONS

Art. 1149. All other actions whose periods

are not fixed in this Code or in other laws
must be brought within five years from the
time the right of action accrues. (n)
Art. 1150. The time for prescription for all
kinds of actions, when there is no special
provision which ordains otherwise, shall be
counted from the day they may be brought.
(1969)
Art. 1151. The time for the prescription of
actions which have for their object the
enforcement of obligations to pay principal
with interest or annuity runs from the last
payment of the annuity or of the interest.
(1970a)
Art. 1152. The period for prescription of
actions to demand the fulfillment of
obligation declared by a judgment
commences from the time the judgment
became final. (1971)
Art. 1153. The period for prescription of
actions to demand accounting runs from the
day the persons who should render the same
cease in their functions.
The period for the action arising from the
result of the accounting runs from the date

CHAPTER 1
GENERAL PROVISIONS
Art. 1156. An obligation is a juridical
necessity to give, to do or not to do. (n)
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law;
and
(5) Quasi-delicts. (1089a)
Art. 1158. Obligations derived from law are
not presumed. Only those expressly
determined in this Code or in special laws
are demandable, and shall be regulated by
the precepts of the law which establishes
them; and as to what has not been foreseen,
by the provisions of this Book. (1090)
Art. 1159. Obligations arising from
contracts have the force of law between the
contracting parties and should be complied
with in good faith. (1091a)

Art. 1160. Obligations derived from quasicontracts shall be subject to the provisions of
Chapter 1, Title XVII, of this Book. (n)

he shall be responsible for any fortuitous

event until he has effected the delivery.
(1096)

(3) When demand would be useless,

as when the obligor has rendered it
beyond his power to perform.

Art. 1161. Civil obligations arising from

criminal offenses shall be governed by the
penal laws, subject to the provisions of
Article 2177, and of the pertinent provisions
of Chapter 2, Preliminary Title, on Human
Relations, and of Title XVIII of this Book,
regulating damages. (1092a)

Art. 1166. The obligation to give a

determinate thing includes that of delivering
all its accessions and accessories, even
though they may not have been mentioned.
(1097a)

In reciprocal obligations, neither party incurs

in delay if the other does not comply or is
not ready to comply in a proper manner with
what is incumbent upon him. From the
moment one of the parties fulfills his
obligation, delay by the other begins.
(1100a)

Art. 1162. Obligations derived from quasidelicts shall be governed by the provisions of
Chapter 2, Title XVII of this Book, and by
special laws. (1093a)
CHAPTER 2
NATURE AND EFFECT OF OBLIGATIONS
Art. 1163. Every person obliged to give
something is also obliged to take care of it
with the proper diligence of a good father of
a family, unless the law or the stipulation of
the parties requires another standard of
care. (1094a)
Art. 1164. The creditor has a right to the
fruits of the thing from the time the
obligation to deliver it arises. However, he
shall acquire no real right over it until the
same has been delivered to him. (1095)
Art. 1165. When what is to be delivered is a
determinate thing, the creditor, in addition to
the right granted him by Article 1170, may
compel the debtor to make the delivery.
If the thing is indeterminate or generic, he
may ask that the obligation be complied with
at the expense of the debtor.
If the obligor delays, or has promised to
deliver the same thing to two or more
persons who do not have the same interest,

Art. 1167. If a person obliged to do

something fails to do it, the same shall be
executed at his cost.
This same rule shall be observed if he does it
in contravention of the tenor of the
obligation. Furthermore, it may be decreed
that what has been poorly done be undone.
(1098)
Art. 1168. When the obligation consists in
not doing, and the obligor does what has
been forbidden him, it shall also be undone
at his expense. (1099a)
Art. 1169. Those obliged to deliver or to do
something incur in delay from the time the
obligee judicially or extrajudicially demands
from them the fulfillment of their obligation.
However, the demand by the creditor shall
not be necessary in order that delay may
exist:
(1) When the obligation or the law
expressly so declare; or
(2) When from the nature and the
circumstances of the obligation it
appears that the designation of the
time when the thing is to be delivered
or the service is to be rendered was a
controlling
motive
for
the
establishment of the contract; or

Art. 1170. Those who in the performance of

their obligations are guilty of fraud,
negligence, or delay, and those who in any
manner contravene the tenor thereof, are
liable for damages. (1101)
Art. 1171. Responsibility arising from fraud
is demandable in all obligations. Any waiver
of an action for future fraud is void. (1102a)
Art. 1172. Responsibility arising from
negligence in the performance of every kind
of obligation is also demandable, but such
liability may be regulated by the courts,
according to the circumstances. (1103)
Art. 1173. The fault or negligence of the
obligor consists in the omission of that
diligence which is required by the nature of
the obligation and corresponds with the
circumstances of the persons, of the time
and of the place. When negligence shows
bad faith, the provisions of Articles 1171 and
2201, paragraph 2, shall apply.
If the law or contract does not state the
diligence which is to be observed in the
performance, that which is expected of a
good father of a family shall be required.
(1104a)

Art. 1174. Except in cases expressly

specified by the law, or when it is otherwise
declared by stipulation, or when the nature
of the obligation requires the assumption of
risk, no person shall be responsible for those
events which could not be foreseen, or
which, though foreseen, were inevitable.
(1105a)

Art.
1179.
Every
obligation
whose
performance does not depend upon a future
or uncertain event, or upon a past event
unknown to the parties, is demandable at
once.

Art. 1175. Usurious transactions shall be

governed by special laws. (n)

Every obligation which contains a resolutory

condition shall also be demandable, without
prejudice to the effects of the happening of
the event. (1113)

Art. 1176. The receipt of the principal by the

creditor without reservation with respect to
the interest, shall give rise to the
presumption that said interest has been
paid.

Art. 1180. When the debtor binds himself to

pay when his means permit him to do so, the
obligation shall be deemed to be one with a
period, subject to the provisions of Article
1197. (n)

The receipt of a later installment of a debt

without reservation as to prior installments,
shall likewise raise the presumption that
such installments have been paid. (1110a)

Art. 1181. In conditional obligations, the

acquisition of rights, as well as the
extinguishment or loss of those already
acquired, shall depend upon the happening
of the event which constitutes the condition.
(1114)

Art. 1177. The creditors, after having

pursued the property in possession of the
debtor to satisfy their claims, may exercise
all the rights and bring all the actions of the
latter for the same purpose, save those
which are inherent in his person; they may
also impugn the acts which the debtor may
have done to defraud them. (1111)
Art. 1178. Subject to the laws, all rights
acquired in virtue of an obligation are
transmissible, if there has been no
stipulation to the contrary. (1112)

CHAPTER 3
DIFFERENT KINDS OF OBLIGATIONS
SECTION 1. - Pure and Conditional
Obligations

Art. 1182. When the fulfillment of the

condition depends upon the sole will of the
debtor, the conditional obligation shall be
void. If it depends upon chance or upon the
will of a third person, the obligation shall
take effect in conformity with the provisions
of this Code. (1115)
Art. 1183. Impossible conditions, those
contrary to good customs or public policy
and those prohibited by law shall annul the
obligation which depends upon them. If the
obligation is divisible, that part thereof which
is not affected by the impossible or unlawful
condition shall be valid.
The condition not to do an impossible thing
shall be considered as not having been
agreed upon. (1116a)

Art. 1184. The condition that some event

happen at a determinate time shall
extinguish the obligation as soon as the time
expires or if it has become indubitable that
the event will not take place. (1117)
Art. 1185. The condition that some event will
not happen at a determinate time shall
render the obligation effective from the
moment the time indicated has elapsed, or if
it has become evident that the event cannot
occur.
If no time has been fixed, the condition shall
be deemed fulfilled at such time as may
have probably been contemplated, bearing
in mind the nature of the obligation. (1118)
Art. 1186. The condition shall be deemed
fulfilled when the obligor voluntarily prevents
its fulfillment. (1119)
Art. 1187. The effects of a conditional
obligation to give, once the condition has
been fulfilled, shall retroact to the day of the
constitution of the obligation. Nevertheless,
when the obligation imposes reciprocal
prestations upon the parties, the fruits and
interests during the pendency of the
condition shall be deemed to have been
mutually compensated. If the obligation is
unilateral, the debtor shall appropriate the
fruits and interests received, unless from the
nature and circumstances of the obligation it
should be inferred that the intention of the
person constituting the same was different.
In obligations to do and not to do, the courts
shall determine, in each case, the retroactive
effect of the condition that has been
complied with. (1120)
Art. 1188. The creditor may, before the
fulfillment of the condition, bring the

appropriate actions for the preservation of

his right.
The debtor may recover what during the
same time he has paid by mistake in case of
a suspensive condition. (1121a)
Art. 1189. When the conditions have been
imposed with the intention of suspending the
efficacy of an obligation to give, the
following rules shall be observed in case of
the improvement, loss or deterioration of the
thing during the pendency of the condition:
(1) If the thing is lost without the fault
of the debtor, the obligation shall be
extinguished;
(2) If the thing is lost through the fault
of the debtor, he shall be obliged to
pay damages; it is understood that
the thing is lost when it perishes, or
goes out of commerce, or disappears
in such a way that its existence is
unknown or it cannot be recovered;
(3) When the thing deteriorates
without the fault of the debtor, the
impairment is to be borne by the
creditor;
(4) If it 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;

right than that granted

usufructuary. (1122)

to

the

Art. 1190. When the conditions have for their

purpose the extinguishment of an obligation
to give, the parties, upon the fulfillment of
said conditions, shall return to each other
what they have received.
In case of the loss, deterioration or
improvement of the thing, the provisions
which, with respect to the debtor, are laid
down in the preceding article shall be
applied to the party who is bound to return.
As for the obligations to do and not to do,
the provisions of the second paragraph of
Article 1187 shall be observed as regards the
effect of the extinguishment of the
obligation. (1123)
Art. 1191. The power to rescind obligations is
implied in reciprocal ones, in case one of the
obligors should not comply with what is
incumbent upon him.
The injured party may choose between the
fulfillment and the rescission of the
obligation, with the payment of damages in
either case. He may also seek rescission,
even after he has chosen fulfillment, if the
latter should become impossible.
The court shall decree the rescission
claimed, unless there be just cause
authorizing the fixing of a period.

(5) If the thing is improved by its

nature, or by time, the improvement
shall inure to the benefit of the
creditor;

This is understood to be without prejudice to

the rights of third persons who have acquired
the thing, in accordance with Articles 1385
and 1388 and the Mortgage Law. (1124)

(6) If it is improved at the expense of

the debtor, he shall have no other

Art. 1192. In case both parties have

committed a breach of the obligation, the

liability of the first infractor shall be

equitably tempered by the courts. If it cannot
be determined which of the parties first
violated the contract, the same shall be
deemed extinguished, and each shall bear
his
own
damages.
(n)

SECTION 2. - Obligations with a Period

Art. 1193. Obligations for whose fulfillment a
day certain has been fixed, shall be
demandable only when that day comes.
Obligations with a resolutory period take
effect at once, but terminate upon arrival of
the day certain.
A day certain is understood to be that which
must necessarily come, although it may not
be known when.
If the uncertainty consists in whether the day
will come or not, the obligation is conditional,
and it shall be regulated by the rules of the
preceding Section. (1125a)
Art. 1194. In case of loss, deterioration or
improvement of the thing before the arrival
of the day certain, the rules in Article 1189
shall be observed. (n)
Art. 1195. Anything paid or delivered before
the arrival of the period, the obligor being
unaware of the period or believing that the
obligation has become due and demandable,
may be recovered, with the fruits and
interests. (1126a)
Art. 1196. Whenever in an obligation a
period is designated, it is presumed to have
been established for the benefit of both the
creditor and the debtor, unless from the
tenor of the same or other circumstances it

should appear that the period has been

established in favor of one or of the other.
(1127)

(5) When the debtor attempts to abscond.

(1129a)

Art. 1197. If the obligation does not fix a

period, but from its nature and the
circumstances it can be inferred that a
period was intended, the courts may fix the
duration thereof.

SECTION 3. - Alternative Obligations

Art. 1199. A person alternatively bound by
different
prestations
shall
completely
perform one of them.

The courts shall also fix the duration of the

period when it depends upon the will of the
debtor.

The creditor cannot be compelled to receive

part of one and part of the other
undertaking. (1131)

In every case, the courts shall determine

such period as may under the circumstances
have been probably contemplated by the
parties. Once fixed by the courts, the period
cannot be changed by them. (1128a)

Art. 1200. The right of choice belongs to the

debtor, unless it has been expressly granted
to the creditor.

Art. 1198. The debtor shall lose every right

to make use of the period:

The debtor shall have no right to choose

those prestations which are impossible,
unlawful or which could not have been the
object of the obligation. (1132)

(1) When after the obligation has been

contracted, he becomes insolvent, unless he
gives a guaranty or security for the debt;

Art. 1201. The choice shall produce no effect

except from the time it has been
communicated. (1133)

(2) When he does not furnish to the creditor

the guaranties or securities which he has
promised;

Art. 1202. The debtor shall lose the right of

choice when among the prestations whereby
he is alternatively bound, only one is
practicable. (1134)

(3) When by his own acts he has impaired

said guaranties or securities after their
establishment,
and
when
through
a
fortuitous event they disappear, unless he
immediately gives new ones equally
satisfactory;
(4)
When
the
debtor
violates
any
undertaking, in consideration of which the
creditor agreed to the period;

The indemnity shall be fixed taking as a

basis the value of the last thing which
disappeared, or that of the service which last
became impossible.
Damages other than the value of the last
thing or service may also be awarded.
(1135a)
Art. 1205. When the choice has been
expressly given to the creditor, the obligation
shall cease to be alternative from the day
when the selection has been communicated
to the debtor.
Until then the responsibility of the debtor
shall be governed by the following rules:
(1) If one of the things is lost through
a fortuitous event, he shall perform
the obligation by delivering that which
the creditor should choose from
among the remainder, or that which
remains if only one subsists;
(2) If the loss of one of the things
occurs through the fault of the debtor,
the creditor may claim any of those
subsisting, or the price of that which,
through the fault of the former, has
disappeared, with a right to damages;

Art. 1203. If through the creditor's acts the

debtor cannot make a choice according to
the terms of the obligation, the latter may
rescind the contract with damages. (n)

(3) If all the things are lost through

the fault of the debtor, the choice by
the creditor shall fall upon the price of
any one of them, also with indemnity
for damages.

Art. 1204. The creditor shall have a right to

indemnity for damages when, through the
fault of the debtor, all the things which are
alternatively the object of the obligation
have been lost, or the compliance of the
obligation has become impossible.

The same rules shall be applied to

obligations to do or not to do in case one,
some or all of the prestations should become
impossible. (1136a)

Art. 1206. When only one prestation has

been agreed upon, but the obligor may
render another in substitution, the obligation
is called facultative.

Art. 1210. The indivisibility of an obligation

does not necessarily give rise to solidarity.
Nor
does
solidarity
of
itself
imply
indivisibility. (n)

The loss or deterioration of the thing

intended as a substitute, through the
negligence of the obligor, does not render
him liable. But once the substitution has
been made, the obligor is liable for the loss
of the substitute on account of his delay,
negligence
or
fraud.
(n)

Art. 1211. Solidarity may exist although the

creditors and the debtors may not be bound
in the same manner and by the same
periods and conditions. (1140)
Art. 1212. Each one of the solidary creditors
may do whatever may be useful to the
others, but not anything which may be
prejudicial to the latter. (1141a)

SECTION 4. - Joint and Solidary Obligations

Art. 1207. The concurrence of two or more
creditors or of two or more debtors in one
and the same obligation does not imply that
each one of the former has a right to
demand, or that each one of the latter is
bound to render, entire compliance with the
prestation. There is a solidary liability only
when the obligation expressly so states, or
when the law or the nature of the obligation
requires solidarity. (1137a)
Art. 1208. If from the law, or the nature or
the wording of the obligations to which the
preceding article refers the contrary does not
appear, the credit or debt shall be presumed
to be divided into as many shares as there
are creditors or debtors, the credits or debts
being considered distinct from one another,
subject to the Rules of Court governing the
multiplicity of suits. (1138a)
Art. 1209. If the division is impossible, the
right of the creditors may be prejudiced only
by their collective acts, and the debt can be
enforced only by proceeding against all the
debtors. If one of the latter should be
insolvent, the others shall not be liable for
his share. (1139)

Art. 1213. A solidary creditor cannot assign

his rights without the consent of the others.
(n)
Art. 1214. The debtor may pay any one of
the solidary creditors; but if any demand,
judicial or extrajudicial, has been made by
one of them, payment should be made to
him. (1142a)
Art.
1215.
Novation,
compensation,
confusion or remission of the debt, made by
any of the solidary creditors or with any of
the solidary debtors, shall extinguish the
obligation,
without
prejudice
to
the
provisions of Article 1219.
The creditor who may have executed any of
these acts, as well as he who collects the
debt, shall be liable to the others for the
share in the obligation corresponding to
them. (1143)
Art. 1216. The creditor may proceed against
any one of the solidary debtors or some or
all of them simultaneously. The demand
made against one of them shall not be an
obstacle to those which may subsequently

be directed against the others, so long as the

debt has not been fully collected. (1144a)
Art. 1217. Payment made by one of the
solidary debtors extinguishes the obligation.
If two or more solidary debtors offer to pay,
the creditor may choose which offer to
accept.
He who made the payment may claim from
his co-debtors only the share which
corresponds to each, with the interest for the
payment already made. If the payment is
made before the debt is due, no interest for
the intervening period may be demanded.
When one of the solidary debtors cannot,
because of his insolvency, reimburse his
share to the debtor paying the obligation,
such share shall be borne by all his codebtors, in proportion to the debt of each.
(1145a)
Art. 1218. Payment by a solidary debtor shall
not entitle him to reimbursement from his
co-debtors if such payment is made after the
obligation has prescribed or become illegal.
(n)
Art. 1219. The remission made by the
creditor of the share which affects one of the
solidary debtors does not release the latter
from his responsibility towards the codebtors, in case the debt had been totally
paid by anyone of them before the remission
was effected. (1146a)
Art. 1220. The remission of the whole
obligation, obtained by one of the solidary
debtors,
does
not
entitle
him
to
reimbursement from his co-debtors. (n)
Art. 1221. If the thing has been lost or if the
prestation has become impossible without

the fault of the solidary debtors,

obligation shall be extinguished.

the

thing or of the value of the service in which

the obligation consists. (1150)

If there was fault on the part of any one of

them, all shall be responsible to the creditor,
for the price and the payment of damages
and interest, without prejudice to their action
against the guilty or negligent debtor.

Art. 1225. For the purposes of the preceding

articles, obligations to give definite things
and those which are not susceptible of
partial performance shall be deemed to be
indivisible.

If through a fortuitous event, the thing is lost

or the performance has become impossible
after one of the solidary debtors has incurred
in delay through the judicial or extrajudicial
demand upon him by the creditor, the
provisions of the preceding paragraph shall
apply. (1147a)

When the obligation has for its object the

execution of a certain number of days of
work, the accomplishment of work by
metrical units, or analogous things which by
their nature are susceptible of partial
performance, it shall be divisible.

Art. 1222. A solidary debtor may, in actions

filed by the creditor, avail himself of all
defenses which are derived from the nature
of the obligation and of those which are
personal to him, or pertain to his own share.
With respect to those which personally
belong to the others, he may avail himself
thereof only as regards that part of the debt
for which the latter are responsible. (1148a)

SECTION 5. - Divisible and Indivisible

Obligations
Art. 1223. The divisibility or indivisibility of
the things that are the object of obligations
in which there is only one debtor and only
one creditor does not alter or modify the
provisions of Chapter 2 of this Title. (1149)
Art. 1224. A joint indivisible obligation gives
rise to indemnity for damages from the time
anyone of the debtors does not comply with
his undertaking. The debtors who may have
been ready to fulfill their promises shall not
contribute to the indemnity beyond the
corresponding portion of the price of the

However, even though the object or service

may be physically divisible, an obligation is
indivisible if so provided by law or intended
by the parties.
In obligations not to do, divisibility or
indivisibility shall be determined by the
character of the prestation in each particular
case.
(1151a)

SECTION 6. - Obligations with a Penal Clause

Art. 1226. In obligations with a penal clause,
the penalty shall substitute the indemnity for
damages and the payment of interests in
case of noncompliance, if there is no
stipulation to the contrary. Nevertheless,
damages shall be paid if the obligor refuses
to pay the penalty or is guilty of fraud in the
fulfillment of the obligation.
The penalty may be enforced only when it is
demandable
in
accordance
with
the
provisions of this Code. (1152a)
Art. 1227. The debtor cannot exempt himself
from the performance of the obligation by

paying the penalty, save in the case where

this right has been expressly reserved for
him. Neither can the creditor demand the
fulfillment of the obligation and the
satisfaction of the penalty at the same time,
unless this right has been clearly granted
him. However, if after the creditor has
decided to require the fulfillment of the
obligation, the performance thereof should
become impossible without his fault, the
penalty may be enforced. (1153a)
Art. 1228. Proof of actual damages suffered
by the creditor is not necessary in order that
the penalty may be demanded. (n)
Art. 1229. The judge shall equitably reduce
the penalty when the principal obligation has
been partly or irregularly complied with by
the debtor. Even if there has been no
performance, the penalty may also be
reduced by the courts if it is iniquitous or
unconscionable. (1154a)
Art. 1230. The nullity of the penal clause
does not carry with it that of the principal
obligation.
The nullity of the principal obligation carries
with it that of the penal clause. (1155)

CHAPTER 4
EXTINGUISHMENT OF OBLIGATIONS
GENERAL PROVISIONS
Art. 1231. Obligations are extinguished:
(1) By payment or performance:
(2) By the loss of the thing due:
(3) By the condonation or remission of
the debt;

(4) By the confusion or merger of the

rights of creditor and debtor;
(5) By compensation;
(6) By novation.
Other
causes
of
extinguishment
of
obligations, such as annulment, rescission,
fulfillment of a resolutory condition, and
prescription, are governed elsewhere in this
Code.
(1156a)
SECTION 1. - Payment or Performance
Art. 1232. Payment means not only the
delivery of money but also the performance,
in any other manner, of an obligation. (n)
Art. 1233. A debt shall not be understood to
have been paid unless the thing or service in
which the obligation consists has been
completely delivered or rendered, as the
case may be. (1157)
Art. 1234. If the obligation has been
substantially performed in good faith, the
obligor may recover as though there had
been a strict and complete fulfillment, less
damages suffered by the obligee. (n)
Art. 1235. When the obligee accepts the
performance, knowing its incompleteness or
irregularity, and without expressing any
protest or objection, the obligation is
deemed fully complied with. (n)
Art. 1236. The creditor is not bound to
accept payment or performance by a third
person who has no interest in the fulfillment
of the obligation, unless there is a stipulation
to the contrary.

Whoever pays for another may demand from

the debtor what he has paid, except that if
he paid without the knowledge or against the
will of the debtor, he can recover only insofar
as the payment has been beneficial to the
debtor. (1158a)
Art. 1237. Whoever pays on behalf of the
debtor without the knowledge or against the
will of the latter, cannot compel the creditor
to subrogate him in his rights, such as those
arising from a mortgage, guaranty, or
penalty. (1159a)
Art. 1238. Payment made by a third person
who does not intend to be reimbursed by the
debtor is deemed to be a donation, which
requires the debtor's consent. But the
payment is in any case valid as to the
creditor who has accepted it. (n)
Art. 1239. In obligations to give, payment
made by one who does not have the free
disposal of the thing due and capacity to
alienate it shall not be valid, without
prejudice to the provisions of Article 1427
under the Title on "Natural Obligations."
(1160a)
Art. 1240. Payment shall be made to the
person in whose favor the obligation has
been constituted, or his successor in interest,
or any person authorized to receive it.
(1162a)
Art. 1241. Payment to a person who is
incapacitated to administer his property shall
be valid if he has kept the thing delivered, or
insofar as the payment has been beneficial
to him.
Payment made to a third person shall also be
valid insofar as it has redounded to the
benefit of the creditor. Such benefit to the

creditor need not be proved in the following

cases:
(1) If after the payment, the third
person acquires the creditor's rights;
(2) If the creditor ratifies the payment
to the third person;
(3) If by the creditor's conduct, the
debtor has been led to believe that
the third person had authority to
receive the payment. (1163a)
Art. 1242. Payment made in good
faith to any person in possession of
the credit shall release the debtor.
(1164)
Art. 1243. Payment made to the creditor by
the debtor after the latter has been judicially
ordered to retain the debt shall not be valid.
(1165)
Art. 1244. The debtor of a thing cannot
compel the creditor to receive a different
one, although the latter may be of the same
value as, or more valuable than that which is
due.
In obligations to do or not to do, an act or
forbearance cannot be substituted by
another act or forbearance against the
obligee's will. (1166a)
Art. 1245. Dation in payment, whereby
property is alienated to the creditor in
satisfaction of a debt in money, shall be
governed by the law of sales. (n)
Art. 1246. When the obligation consists in
the delivery of an indeterminate or generic
thing, whose quality and circumstances have
not been stated, the creditor cannot demand
10

a thing of superior quality. Neither can the

debtor deliver a thing of inferior quality. The
purpose of the obligation and other
circumstances
shall
be
taken
into
consideration. (1167a)
Art. 1247. Unless it is otherwise stipulated,
the extrajudicial expenses required by the
payment shall be for the account of the
debtor. With regard to judicial costs, the
Rules of Court shall govern. (1168a)
Art. 1248. Unless there is an express
stipulation to that effect, the creditor cannot
be compelled partially to receive the
prestations in which the obligation consists.
Neither may the debtor be required to make
partial payments.
However, when the debt is in part liquidated
and in part unliquidated, the creditor may
demand and the debtor may effect the
payment of the former without waiting for
the liquidation of the latter. (1169a)
Art. 1249. The payment of debts in money
shall be made in the currency stipulated, and
if it is not possible to deliver such currency,
then in the currency which is legal tender in
the Philippines.
The delivery of promissory notes payable to
order, or bills of exchange or other
mercantile documents shall produce the
effect of payment only when they have been
cashed, or when through the fault of the
creditor they have been impaired.
In the meantime, the action derived from the
original obligation shall be held in the
abeyance. (1170)
Art. 1250. In case an extraordinary inflation
or deflation of the currency stipulated should

supervene, the value of the currency at the

time of the establishment of the obligation
shall be the basis of payment, unless there is
an agreement to the contrary. (n)

Art. 1253. If the debt produces interest,

payment of the principal shall not be
deemed to have been made until the
interests have been covered. (1173)

Art. 1251. Payment shall be made in the

place designated in the obligation.

Art. 1254. When the payment cannot be

applied in accordance with the preceding
rules, or if application can not be inferred
from other circumstances, the debt which is
most onerous to the debtor, among those
due, shall be deemed to have been satisfied.

There being no express stipulation and if the

undertaking is to deliver a determinate thing,
the payment shall be made wherever the
thing might be at the moment the obligation
was constituted.
In any other case the place of payment shall
be the domicile of the debtor.
If the debtor changes his domicile in bad
faith or after he has incurred in delay, the
additional expenses shall be borne by him.
These provisions are without prejudice to
venue under the Rules of Court. (1171a)

SUBSECTION 1. - Application of Payments

Art. 1252. He who has various debts of the
same kind in favor of one and the same
creditor, may declare at the time of making
the payment, to which of them the same
must be applied. Unless the parties so
stipulate, or when the application of
payment is made by the party for whose
benefit the term has been constituted,
application shall not be made as to debts
which are not yet due.
If the debtor accepts from the creditor a
receipt in which an application of the
payment is made, the former cannot
complain of the same, unless there is a
cause for invalidating the contract. (1172a)

If the debts due are of the same nature and

burden, the payment shall be applied to all
of
them
proportionately.
(1174a)

SUBSECTION 2. - Payment by Cession

Art. 1255. The debtor may cede or assign his
property to his creditors in payment of his
debts. This cession, unless there is
stipulation to the contrary, shall only release
the debtor from responsibility for the net
proceeds of the thing assigned. The
agreements which, on the effect of the
cession, are made between the debtor and
his creditors shall be governed by special
laws.
(1175a)
SUBSECTION 3. - Tender of Payment and
Consignation
Art. 1256. If the creditor to whom tender of
payment has been made refuses without just
cause to accept it, the debtor shall be
released
from
responsibility
by
the
consignation of the thing or sum due.
Consignation alone shall produce the same
effect in the following cases:

11

(1) When the creditor is absent or

unknown, or does not appear at the
place of payment;

Before the creditor has accepted the

consignation, or before a judicial declaration
that the consignation has been properly
made, the debtor may withdraw the thing or
the sum deposited, allowing the obligation to
remain in force. (1180)

presumed that the loss was due to his fault,

unless there is proof to the contrary, and
without prejudice to the provisions of article
1165. This presumption does not apply in
case of earthquake, flood, storm, or other
natural calamity. (1183a)
Art. 1266. The debtor in obligations to do
shall also be released when the prestation
becomes legally or physically impossible
without the fault of the obligor. (1184a)

(4) When two or more persons claim

the same right to collect;

Art. 1261. If, the consignation having been

made, the creditor should authorize the
debtor to withdraw the same, he shall lose
every preference which he may have over
the thing. The co-debtors, guarantors and
sureties shall be released. (1181a)

(5) When the title of the obligation

has been lost. (1176a)

SECTION 2. - Loss of the Thing Due

(2) When he is incapacitated to

receive the payment at the time it is
due;
(3) When, without just cause, he
refuses to give a receipt;

Art. 1257. In order that the consignation of

the thing due may release the obligor, it
must first be announced to the persons
interested in the fulfillment of the obligation.
The consignation shall be ineffectual if it is
not made strictly in consonance with the
provisions which regulate payment. (1177)
Art. 1258. Consignation shall be made by
depositing the things due at the disposal of
judicial authority, before whom the tender of
payment shall be proved, in a proper case,
and the announcement of the consignation
in other cases.
The consignation having been made, the
interested parties shall also be notified
thereof. (1178)
Art. 1259. The expenses of consignation,
when properly made, shall be charged
against the creditor. (1178)
Art. 1260. Once the consignation has been
duly made, the debtor may ask the judge to
order the cancellation of the obligation.

Art. 1262. An obligation which consists in the

delivery of a determinate thing shall be
extinguished if it should be lost or destroyed
without the fault of the debtor, and before he
has incurred in delay.
When by law or stipulation, the obligor is
liable even for fortuitous events, the loss of
the thing does not extinguish the obligation,
and he shall be responsible for damages. The
same rule applies when the nature of the
obligation requires the assumption of risk.
(1182a)
Art. 1263. In an obligation to deliver a
generic thing, the loss or destruction of
anything of the same kind does not
extinguish the obligation. (n)

Art. 1267. When the service has become so

difficult as to be manifestly beyond the
contemplation of the parties, the obligor may
also be released therefrom, in whole or in
part. (n)
Art. 1268. When the debt of a thing certain
and determinate proceeds from a criminal
offense, the debtor shall not be exempted
from the payment of its price, whatever may
be the cause for the loss, unless the thing
having been offered by him to the person
who should receive it, the latter refused
without justification to accept it. (1185)
Art. 1269. The obligation having been
extinguished by the loss of the thing, the
creditor shall have all the rights of action
which the debtor may have against third
persons by reason of the loss. (1186)

SECTION 3. - Condonation or Remission of

the Debt

Art. 1264. The courts shall determine

whether, under the circumstances, the
partial loss of the object of the obligation is
so important as to extinguish the obligation.
(n)

Art. 1270. Condonation or remission is

essentially gratuitous, and requires the
acceptance by the obligor. It may be made
expressly or impliedly.

Art. 1265. Whenever the thing is lost in the

possession of the debtor, it shall be

One and the other kind shall be subject to

the rules which govern inofficious donations.

12

Express condonation shall, furthermore,

comply with the forms of donation. (1187)
Art. 1271. The delivery of a private
document evidencing a credit, made
voluntarily by the creditor to the debtor,
implies the renunciation of the action which
the former had against the latter.
If in order to nullify this waiver it should be
claimed to be inofficious, the debtor and his
heirs may uphold it by proving that the
delivery of the document was made in virtue
of payment of the debt. (1188)
Art. 1272. Whenever the private document in
which the debt appears is found in the
possession of the debtor, it shall be
presumed that the creditor delivered it
voluntarily, unless the contrary is proved.
(1189)
Art. 1273. The renunciation of the principal
debt
shall
extinguish
the
accessory
obligations; but the waiver of the latter shall
leave the former in force. (1190)
Art. 1274. It is presumed that the accessory
obligation of pledge has been remitted when
the thing pledged, after its delivery to the
creditor, is found in the possession of the
debtor, or of a third person who owns the
thing.
(1191a)

SECTION 4. - Confusion or Merger of Rights

Art. 1275. The obligation is extinguished
from the time the characters of creditor and
debtor are merged in the same person.
(1192a)
Art. 1276. Merger which takes place in the
person of the principal debtor or creditor

benefits the guarantors. Confusion which

takes place in the person of any of the latter
does not extinguish the obligation. (1193)
Art. 1277. Confusion does not extinguish a
joint obligation except as regards the share
corresponding to the creditor or debtor in
whom the two characters concur. (1194)

up compensation as regards what the

creditor may owe the principal debtor. (1197)
Art. 1281. Compensation may be total or
partial. When the two debts are of the same
amount, there is a total compensation. (n)
Art. 1282. The parties may agree upon the
compensation of debts which are not yet
due. (n)

SECTION 5. - Compensation
Art. 1278. Compensation shall take place
when two persons, in their own right, are
creditors and debtors of each other. (1195)
Art. 1279. In order that compensation may
be proper, it is necessary:
(1) That each one of the obligors be
bound principally, and that he be at
the same time a principal creditor of
the other;
(2) That both debts consist in a sum of
money, or if the things due are
consumable, they be of the same
kind, and also of the same quality if
the latter has been stated;
(3) That the two debts be due;
(4) That they
demandable;

be

liquidated

and

(5) That over neither of them there be

any
retention
or
controversy,
commenced by third persons and
communicated in due time to the
debtor. (1196)
Art. 1280. Notwithstanding the provisions of
the preceding article, the guarantor may set

Art. 1283. If one of the parties to a suit over

an obligation has a claim for damages
against the other, the former may set it off
by proving his right to said damages and the
amount thereof. (n)
Art. 1284. When one or both debts are
rescissible or voidable, they may be
compensated against each other before they
are judicially rescinded or avoided. (n)
Art. 1285. The debtor who has consented to
the assignment of rights made by a creditor
in favor of a third person, cannot set up
against the assignee the compensation
which would pertain to him against the
assignor, unless the assignor was notified by
the debtor at the time he gave his consent,
that he reserved his right to the
compensation.
If the creditor communicated the cession to
him but the debtor did not consent thereto,
the latter may set up the compensation of
debts previous to the cession, but not of
subsequent ones.
If the assignment is made without the
knowledge of the debtor, he may set up the
compensation of all credits prior to the same
and also later ones until he had knowledge
of the assignment. (1198a)

13

Art. 1286. Compensation takes place by

operation of law, even though the debts may
be payable at different places, but there
shall be an indemnity for expenses of
exchange or transportation to the place of
payment. (1199a)
Art. 1287. Compensation shall not be proper
when one of the debts arises from a
depositum or from the obligations of a
depositary or of a bailee in commodatum.
Neither can compensation be set up against
a creditor who has a claim for support due by
gratuitous title, without prejudice to the
provisions of paragraph 2 of Article 301.
(1200a)
Art.
1288.
Neither
shall
there
be
compensation if one of the debts consists in
civil liability arising from a penal offense. (n)
Art. 1289. If a person should have against
him several debts which are susceptible of
compensation, the rules on the application of
payments shall apply to the order of the
compensation. (1201)
Art. 1290. When all the requisites mentioned
in Article 1279 are present, compensation
takes effect by operation of law, and
extinguishes both debts to the concurrent
amount, even though the creditors and
debtors are not aware of the compensation.
(1202a)

(2) Substituting the person of the

debtor;
(3) Subrogating a third person in the
rights of the creditor. (1203)
Art. 1292. In order that an obligation may be
extinguished by another which substitute the
same, it is imperative that it be so declared
in unequivocal terms, or that the old and the
new obligations be on every point
incompatible with each other. (1204)
Art. 1293. Novation which consists in
substituting a new debtor in the place of the
original one, may be made even without the
knowledge or against the will of the latter,
but not without the consent of the creditor.
Payment by the new debtor gives him the
rights mentioned in Articles 1236 and 1237.
(1205a)
Art. 1294. If the substitution is without the
knowledge or against the will of the debtor,
the new debtor's insolvency or nonfulfillment of the obligations shall not give
rise to any liability on the part of the original
debtor. (n)
Art. 1295. The insolvency of the new debtor,
who has been proposed by the original
debtor and accepted by the creditor, shall
not revive the action of the latter against the
original obligor, except when said insolvency
was already existing and of public
knowledge, or known to the debtor, when
the delegated his debt. (1206a)

SECTION 6. - Novation
Art. 1291. Obligations may be modified by:
(1) Changing their object or principal
conditions;

Art. 1296. When the principal obligation is

extinguished in consequence of a novation,
accessory obligations may subsist only
insofar as they may benefit third persons
who did not give their consent. (1207)

Art. 1297. If the new obligation is void, the

original one shall subsist, unless the parties
intended that the former relation should be
extinguished in any event. (n)
Art. 1298. The novation is void if the original
obligation was void, except when annulment
may be claimed only by the debtor or when
ratification validates acts which are voidable.
(1208a)
Art. 1299. If the original obligation was
subject to a suspensive or resolutory
condition, the new obligation shall be under
the same condition, unless it is otherwise
stipulated. (n)
Art. 1300. Subrogation of a third person in
the rights of the creditor is either legal or
conventional. The former is not presumed,
except in cases expressly mentioned in this
Code; the latter must be clearly established
in order that it may take effect. (1209a)
Art. 1301. Conventional subrogation of a
third person requires the consent of the
original parties and of the third person. (n)
Art. 1302. It is presumed that there is legal
subrogation:
(1) When a creditor pays another
creditor who is preferred, even
without the debtor's knowledge;
(2) When a third person, not
interested in the obligation, pays with
the express or tacit approval of the
debtor;
(3)
When,
even
without
the
knowledge of the debtor, a person
interested in the fulfillment of the
obligation pays, without prejudice to

14

the effects of confusion as to the

latter's share. (1210a)
Art. 1303. Subrogation transfers to the
persons subrogated the credit with all the
rights thereto appertaining, either against
the debtor or against third person, be they
guarantors or possessors of mortgages,
subject to stipulation in a conventional
subrogation. (1212a)
Art. 1304. A creditor, to whom partial
payment has been made, may exercise his
right for the remainder, and he shall be
preferred to the person who has been
subrogated in his place in virtue of the
partial payment of the same credit. (1213)

Title II. - CONTRACTS

CHAPTER 1
GENERAL PROVISIONS
Art. 1305. A contract is a meeting of minds
between two persons whereby one binds
himself, with respect to the other, to give
something or to render some service.
(1254a)
Art. 1306. The contracting parties may
establish such stipulations, clauses, terms
and conditions as they may deem
convenient, provided they are not contrary
to law, morals, good customs, public order,
or public policy. (1255a)
Art. 1307. Innominate contracts shall be
regulated by the stipulations of the parties,
by the provisions of Titles I and II of this
Book, by the rules governing the most
analogous nominate contracts, and by the
customs of the place. (n)

Art. 1308. The contract must bind both

contracting parties; its validity or compliance
cannot be left to the will of one of them.
(1256a)

Art. 1314. Any third person who induces

another to violate his contract shall be liable
for damages to the other contracting party.
(n)

Art. 1309. The determination of the

performance may be left to a third person,
whose decision shall not be binding until it
has been made known to both contracting
parties. (n)

Art. 1315. Contracts are perfected by mere

consent, and from that moment the parties
are bound not only to the fulfillment of what
has been expressly stipulated but also to all
the consequences which, according to their
nature, may be in keeping with good faith,
usage and law. (1258)

Art. 1310. The

obligatory if it
such case, the
equitable under

determination shall not be

is evidently inequitable. In
courts shall decide what is
the circumstances. (n)

Art. 1311. Contracts take effect only

between the parties, their assigns and heirs,
except in case where the rights and
obligations arising from the contract are not
transmissible by their nature, or by
stipulation or by provision of law. The heir is
not liable beyond the value of the property
he received from the decedent.
If a contract should contain some stipulation
in favor of a third person, he may demand its
fulfillment provided he communicated his
acceptance to the obligor before its
revocation. A mere incidental benefit or
interest of a person is not sufficient. The
contracting parties must have clearly and
deliberately conferred a favor upon a third
person. (1257a)
Art. 1312. In contracts creating real rights,
third persons who come into possession of
the object of the contract are bound thereby,
subject to the provisions of the Mortgage
Law and the Land Registration Laws. (n)
Art. 1313. Creditors are protected in cases of
contracts intended to defraud them. (n)

Art. 1316. Real contracts, such as deposit,

pledge and Commodatum, are not perfected
until the delivery of the object of the
obligation. (n)
Art. 1317. No one may contract in the name
of another without being authorized by the
latter, or unless he has by law a right to
represent him.
A contract entered into in the name of
another by one who has no authority or legal
representation, or who has acted beyond his
powers, shall be unenforceable, unless it is
ratified, expressly or impliedly, by the person
on whose behalf it has been executed,
before it is revoked by the other contracting
party.
(1259a)

CHAPTER 2
ESSENTIAL REQUISITES OF CONTRACTS
GENERAL PROVISIONS
Art. 1318. There is no contract unless the
following requisites concur:
(1) Consent of the contracting parties;
(2) Object certain which is the subject
matter of the contract;

15

(3) Cause of the obligation which is

established. (1261)
SECTION 1. - Consent
Art. 1319. Consent is manifested by the
meeting of the offer and the acceptance
upon the thing and the cause which are to
constitute the contract. The offer must be
certain and the acceptance absolute. A
qualified acceptance constitutes a counteroffer.
Acceptance made by letter or telegram does
not bind the offerer except from the time it
came to his knowledge. The contract, in such
a case, is presumed to have been entered
into in the place where the offer was made.
(1262a)
Art. 1320. An acceptance may be express or
implied. (n)
Art. 1321. The person making the offer may
fix the time, place, and manner of
acceptance, all of which must be complied
with. (n)
Art. 1322. An offer made through an agent is
accepted from the time acceptance is
communicated to him. (n)
Art. 1323. An offer becomes ineffective upon
the death, civil interdiction, insanity, or
insolvency of either party before acceptance
is conveyed. (n)
Art. 1324. When the offerer has allowed the
offeree a certain period to accept, the offer
may be withdrawn at any time before
acceptance
by
communicating
such
withdrawal, except when the option is
founded upon a consideration, as something
paid or promised. (n)

Art. 1325. Unless it appears otherwise,

business advertisements of things for sale
are not definite offers, but mere invitations
to make an offer. (n)

Mistake as to the identity or qualifications of

one of the parties will vitiate consent only
when such identity or qualifications have
been the principal cause of the contract.

Art. 1326. Advertisements for bidders are

simply invitations to make proposals, and the
advertiser is not bound to accept the highest
or lowest bidder, unless the contrary
appears. (n)

A simple mistake of account shall give rise to

its correction. (1266a)

Art. 1327. The following cannot give consent

to a contract:

Art. 1332. When one of the parties is unable

to read, or if the contract is in a language not
understood by him, and mistake or fraud is
alleged, the person enforcing the contract
must show that the terms thereof have been
fully explained to the former. (n)

(1) Unemancipated minors;

(2) Insane or demented persons, and
deaf-mutes who do not know how to
write. (1263a)
Art. 1328. Contracts entered into during a
lucid interval are valid. Contracts agreed to
in a state of drunkenness or during a
hypnotic spell are voidable. (n)
Art. 1329. The incapacity declared in Article
1327 is subject to the modifications
determined by law, and is understood to be
without prejudice to special disqualifications
established in the laws. (1264)
Art. 1330. A contract where consent is given
through mistake, violence, intimidation,
undue influence, or fraud is voidable.
(1265a)
Art. 1331. In order that mistake may
invalidate consent, it should refer to the
substance of the thing which is the object of
the contract, or to those conditions which
have principally moved one or both parties
to enter into the contract.

Art. 1333. There is no mistake if the party

alleging it knew the doubt, contingency or
risk affecting the object of the contract. (n)
Art. 1334. Mutual error as to the legal effect
of an agreement when the real purpose of
the parties is frustrated, may vitiate consent.
(n)
Art. 1335. There is violence when in order to
wrest consent, serious or irresistible force is
employed.
There is intimidation when one of the
contracting parties is compelled by a
reasonable and well-grounded fear of an
imminent and grave evil upon his person or
property, or upon the person or property of
his spouse, descendants or ascendants, to
give his consent.
To determine the degree of intimidation, the
age, sex and condition of the person shall be
borne in mind.
A threat to enforce one's claim through
competent authority, if the claim is just or
legal, does not vitiate consent. (1267a)

16

Art. 1336. Violence or intimidation shall

annul the obligation, although it may have
been employed by a third person who did not
take part in the contract. (1268)
Art. 1337. There is undue influence when a
person takes improper advantage of his
power over the will of another, depriving the
latter of a reasonable freedom of choice. The
following circumstances shall be considered:
the confidential, family, spiritual and other
relations between the parties, or the fact
that the person alleged to have been unduly
influenced was suffering from mental
weakness, or was ignorant or in financial
distress. (n)
Art. 1338. There is fraud when, through
insidious words or machinations of one of the
contracting parties, the other is induced to
enter into a contract which, without them, he
would not have agreed to. (1269)
Art. 1339. Failure to disclose facts, when
there is a duty to reveal them, as when the
parties are bound by confidential relations,
constitutes fraud. (n)
Art. 1340. The usual exaggerations in trade,
when the other party had an opportunity to
know the facts, are not in themselves
fraudulent. (n)
Art. 1341. A mere expression of an opinion
does not signify fraud, unless made by an
expert and the other party has relied on the
former's special knowledge. (n)
Art. 1342. Misrepresentation by a third
person does not vitiate consent, unless such
misrepresentation has created substantial
mistake and the same is mutual. (n)

Art. 1343. Misrepresentation made in good

faith is not fraudulent but may constitute
error. (n)
Art. 1344. In order that fraud may make a
contract voidable, it should be serious and
should not have been employed by both
contracting parties.
Incidental fraud only obliges the person
employing it to pay damages. (1270)
Art. 1345. Simulation of a contract may be
absolute or relative. The former takes place
when the parties do not intend to be bound
at all; the latter, when the parties conceal
their true agreement. (n)
Art. 1346. An absolutely simulated or
fictitious contract is void. A relative
simulation, when it does not prejudice a third
person and is not intended for any purpose
contrary to law, morals, good customs,
public order or public policy binds the parties
to
their
real
agreement.
(n)

SECTION 2. - Object of Contracts

Art. 1347. All things which are not outside
the commerce of men, including future
things, may be the object of a contract. All
rights which are not intransmissible may also
be the object of contracts.
No contract may be entered into upon future
inheritance except in cases expressly
authorized by law.
All services which are not contrary to law,
morals, good customs, public order or public
policy may likewise be the object of a
contract. (1271a)

Art. 1348. Impossible things or services

cannot be the object of contracts. (1272)
Art. 1349. The object of every contract must
be determinate as to its kind. The fact that
the quantity is not determinate shall not be
an obstacle to the existence of the contract,
provided it is possible to determine the
same, without the need of a new contract
between
the
parties.
(1273)

SECTION 3. - Cause of Contracts

Art. 1350. In onerous contracts the cause is
understood to be, for each contracting party,
the prestation or promise of a thing or
service by the other; in remuneratory ones,
the service or benefit which is remunerated;
and in contracts of pure beneficence, the
mere liberality of the benefactor. (1274)
Art. 1351. The particular motives of the
parties in entering into a contract are
different from the cause thereof. (n)
Art. 1352. Contracts without cause, or with
unlawful cause, produce no effect whatever.
The cause is unlawful if it is contrary to law,
morals, good customs, public order or public
policy. (1275a)
Art. 1353. The statement of a false cause in
contracts shall render them void, if it should
not be proved that they were founded upon
another cause which is true and lawful.
(1276)
Art. 1354. Although the cause is not stated in
the contract, it is presumed that it exists and
is lawful, unless the debtor proves the
contrary. (1277)

17

Art. 1355. Except in cases specified by law,

lesion or inadequacy of cause shall not
invalidate a contract, unless there has been
fraud, mistake or undue influence. (n)

CHAPTER 3
FORM OF CONTRACTS
Art. 1356. Contracts shall be obligatory, in
whatever form they may have been entered
into, provided all the essential requisites for
their validity are present. However, when the
law requires that a contract be in some form
in order that it may be valid or enforceable,
or that a contract be proved in a certain way,
that
requirement
is
absolute
and
indispensable. In such cases, the right of the
parties stated in the following article cannot
be exercised. (1278a)
Art. 1357. If the law requires a document or
other special form, as in the acts and
contracts enumerated in the following
article, the contracting parties may compel
each other to observe that form, once the
contract has been perfected. This right may
be exercised simultaneously with the action
upon the contract. (1279a)
Art. 1358. The following must appear in a
public document:
(1) Acts and contracts which have for
their
object
the
creation,
transmission,
modification
or
extinguishment of real rights over
immovable property; sales of real
property or of an interest therein a
governed by Articles 1403, No. 2, and
1405;
(2) The cession, repudiation or
renunciation of hereditary rights or of

those of the conjugal partnership of

gains;
(3) The power to administer property,
or any other power which has for its
object an act appearing or which
should appear in a public document,
or should prejudice a third person;
(4) The cession of actions or rights
proceeding from an act appearing in a
public document.
All other contracts where the amount
involved exceeds five hundred pesos must
appear in writing, even a private one. But
sales of goods, chattels or things in action
are governed by Articles, 1403, No. 2 and
1405.
(1280a)
CHAPTER 4
REFORMATION OF INSTRUMENTS (n)
Art. 1359. When, there having been a
meeting of the minds of the parties to a
contract, their true intention is not expressed
in the instrument purporting to embody the
agreement, by reason of mistake, fraud,
inequitable conduct or accident, one of the
parties may ask for the reformation of the
instrument to the end that such true
intention may be expressed.
If mistake, fraud, inequitable conduct, or
accident has prevented a meeting of the
minds of the parties, the proper remedy is
not reformation of the instrument but
annulment of the contract.
Art. 1360. The principles of the general law
on the reformation of instruments are hereby
adopted insofar as they are not in conflict
with the provisions of this Code.

Art. 1361. When a mutual mistake of the

parties causes the failure of the instrument
to disclose their real agreement, said
instrument may be reformed.
Art. 1362. If one party was mistaken and the
other acted fraudulently or inequitably in
such a way that the instrument does not
show their true intention, the former may
ask for the reformation of the instrument.
Art. 1363. When one party was mistaken and
the other knew or believed that the
instrument did not state their real
agreement, but concealed that fact from the
former, the instrument may be reformed.
Art. 1364. When through the ignorance, lack
of skill, negligence or bad faith on the part of
the person drafting the instrument or of the
clerk or typist, the instrument does not
express the true intention of the parties, the
courts may order that the instrument be
reformed.
Art. 1365. If two parties agree upon the
mortgage or pledge of real or personal
property, but the instrument states that the
property is sold absolutely or with a right of
repurchase, reformation of the instrument is
proper.
Art. 1366. There shall be no reformation in
the following cases:
(1) Simple donations inter vivos
wherein no condition is imposed;
(2) Wills;
(3) When the real agreement is void.
Art. 1367. When one of the parties has
brought an action to enforce the instrument,
18

he cannot
reformation.

subsequently

ask

for

its

Art. 1368. Reformation may be ordered at

the instance of either party or his successors
in interest, if the mistake was mutual;
otherwise, upon petition of the injured party,
or his heirs and assigns.
Art. 1369. The procedure for the reformation
of instrument shall be governed by rules of
court to be promulgated by the Supreme
Court.

CHAPTER 5
INTERPRETATION OF CONTRACTS
Art. 1370. If the terms of a contract are clear
and leave no doubt upon the intention of the
contracting parties, the literal meaning of its
stipulations shall control.
If the words appear to be contrary to the
evident intention of the parties, the latter
shall prevail over the former. (1281)
Art. 1371. In order to judge the intention of
the
contracting
parties,
their
contemporaneous and subsequent acts shall
be principally considered. (1282)
Art. 1372. However general the terms of a
contract may be, they shall not be
understood to comprehend things that are
distinct and cases that are different from
those upon which the parties intended to
agree. (1283)
Art. 1373. If some stipulation of any contract
should admit of several meanings, it shall be
understood as bearing that import which is
most adequate to render it effectual. (1284)

Art. 1374. The various stipulations of a

contract shall be interpreted together,
attributing to the doubtful ones that sense
which may result from all of them taken
jointly. (1285)
Art. 1375. Words which may have different
significations shall be understood in that
which is most in keeping with the nature and
object of the contract. (1286)
Art. 1376. The usage or custom of the place
shall be borne in mind in the interpretation of
the ambiguities of a contract, and shall fill
the omission of stipulations which are
ordinarily established. (1287)
Art. 1377. The interpretation of obscure
words or stipulations in a contract shall not
favor the party who caused the obscurity.
(1288)
Art. 1378. When it is absolutely impossible to
settle doubts by the rules established in the
preceding articles, and the doubts refer to
incidental circumstances of a gratuitous
contract, the least transmission of rights and
interests shall prevail. If the contract is
onerous, the doubt shall be settled in favor
of the greatest reciprocity of interests.

RESCISSIBLE CONTRACTS
Art. 1380. Contracts validly agreed upon
may be rescinded in the cases established
by law. (1290)
Art. 1381.
rescissible:

The

following

contracts

are

(1) 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;
(2)
Those
agreed
upon
in
representation of absentees, if the
latter suffer the lesion stated in the
preceding number;
(3) Those undertaken in fraud of
creditors when the latter cannot in
any other manner collect the claims
due them;
(4) 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;

If the doubts are cast upon the principal

object of the contract in such a way that it
cannot be known what may have been the
intention or will of the parties, the contract
shall be null and void. (1289)

(5) All other contracts specially

declared by law to be subject to
rescission. (1291a)

Art. 1379. The principles of interpretation

stated in Rule 123 of the Rules of Court shall
likewise be observed in the construction of
contracts.
(n)

Art. 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. (1292)

CHAPTER 6

Art. 1383. The action for rescission is

subsidiary; it cannot be instituted except

19

when the party suffering damage has no

other legal means to obtain reparation for
the same. (1294)
Art. 1384. Rescission shall be only to the
extent necessary to cover the damages
caused. (n)
Art. 1385. Rescission creates the obligation
to return the things which were the object of
the contract, together with their fruits, and
the price with its interest; consequently, it
can be carried out only when he who
demands rescission can return whatever he
may be obliged to restore.
Neither shall rescission take place when the
things which are the object of the contract
are legally in the possession of third persons
who did not act in bad faith.
In this case, indemnity for damages may be
demanded from the person causing the loss.
(1295)
Art. 1386. Rescission referred to in Nos. 1
and 2 of Article 1381 shall not take place
with respect to contracts approved by the
courts. (1296a)
Art. 1387. All contracts by virtue of which the
debtor alienates property by gratuitous title
are presumed to have been entered into in
fraud of creditors, when the donor did not
reserve sufficient property to pay all debts
contracted before the donation.
Alienations by onerous title are also
presumed fraudulent when made by persons
against whom some judgment has been
issued. The decision or attachment need not
refer to the property alienated, and need not
have been obtained by the party seeking the
rescission.

In addition to these presumptions, the design

to defraud creditors may be proved in any
other manner recognized by the law of
evidence. (1297a)

Art. 1391. The action for annulment shall be

brought within four years.

Art. 1388. Whoever acquires in bad faith the

things alienated in fraud of creditors, shall
indemnify the latter for damages suffered by
them on account of the alienation,
whenever, due to any cause, it should be
impossible for him to return them.

In cases of intimidation, violence or

undue influence, from the time the
defect of the consent ceases.

If there are two or more alienations, the first

acquirer shall be liable first, and so on
successively. (1298a)

And when the action refers to contracts

entered
into
by
minors
or
other
incapacitated persons, from the time the
guardianship ceases. (1301a)

Art. 1389. The action to claim rescission

must be commenced within four years.
For persons under guardianship and for
absentees, the period of four years shall not
begin until the termination of the former's
incapacity, or until the domicile of the latter
is
known.
(1299)

CHAPTER 7
VOIDABLE CONTRACTS
Art. 1390. The following contracts are
voidable or annullable, even though there
may have been no damage to the
contracting parties:
(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.
These contracts are binding, unless they are
annulled by a proper action in court. They
are susceptible of ratification. (n)

This period shall begin:

In case of mistake or fraud, from the

time of the discovery of the same.

Art. 1392. Ratification extinguishes the

action to annul a voidable contract. (1309a)
Art. 1393. Ratification may be effected
expressly or tacitly. It is understood that
there is a tacit ratification if, with knowledge
of the reason which renders the contract
voidable and such reason having ceased, the
person who has a right to invoke it should
execute an act which necessarily implies an
intention to waive his right. (1311a)
Art. 1394. Ratification may be effected by
the guardian of the incapacitated person. (n)
Art. 1395. Ratification does not require the
conformity of the contracting party who has
no right to bring the action for annulment.
(1312)
Art. 1396. Ratification cleanses the contract
from all its defects from the moment it was
constituted. (1313)
Art. 1397. The action for the annulment of
contracts may be instituted by all who are
thereby obliged principally or subsidiarily.
20

However, persons who are capable cannot

allege the incapacity of those with whom
they contracted; nor can those who exerted
intimidation, violence, or undue influence, or
employed fraud, or caused mistake base
their action upon these flaws of the contract.
(1302a)
Art. 1398. An obligation having been
annulled, the contracting 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.
In obligations to render service, the value
thereof shall be the basis for damages.
(1303a)
Art. 1399. When the defect of the contract
consists in the incapacity of one of the
parties, the incapacitated person is not
obliged to make any restitution except
insofar as he has been benefited by the thing
or price received by him. (1304)
Art. 1400. Whenever the person obliged by
the decree of annulment to return the thing
can not do so because it has been lost
through his fault, he shall return the fruits
received and the value of the thing at the
time of the loss, with interest from the same
date. (1307a)
Art. 1401. The action for annulment of
contracts shall be extinguished when the
thing which is the object thereof is lost
through the fraud or fault of the person who
has a right to institute the proceedings.
If the right of action is based upon the
incapacity of any one of the contracting
parties, the loss of the thing shall not be an
obstacle to the success of the action, unless

said loss took place through the fraud or

fault of the plaintiff. (1314a)
Art. 1402. As long as one of the contracting
parties does not restore what in virtue of the
decree of annulment he is bound to return,
the other cannot be compelled to comply
with what is incumbent upon him. (1308)

CHAPTER 8
UNENFORCEABLE CONTRACTS (n)
Art. 1403. The following contracts are
unenforceable, unless they are ratified:
(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 of 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.
Art. 1404. Unauthorized contracts are
governed by Article 1317 and the principles
of agency in Title X of this Book.
Art. 1405. Contracts infringing the Statute of
Frauds, referred to in No. 2 of Article 1403,

21

are ratified by the failure to object to the

presentation of oral evidence to prove the
same, or by the acceptance of benefit under
them.
Art. 1406. When a contract is enforceable
under the Statute of Frauds, and a public
document is necessary for its registration in
the Registry of Deeds, the parties may avail
themselves of the right under Article 1357.
Art. 1407. In a contract where both parties
are incapable of giving consent, express or
implied ratification by the parent, or
guardian, as the case may be, of one of the
contracting parties shall give the contract
the same effect as if only one of them were
incapacitated.
If ratification is made by the parents or
guardians, as the case may be, of both
contracting parties, the contract shall be
validated from the inception.
Art. 1408. Unenforceable contracts cannot
be
assailed
by
third
persons.

CHAPTER 9
VOID AND INEXISTENT CONTRACTS
Art. 1409. The following contracts are
inexistent and void from the beginning:
(1) Those whose cause, object or
purpose is contrary to law, morals,
good customs, public order or public
policy;
(2) Those which are
simulated or fictitious;

absolutely

(3) Those whose cause or object did

not exist at the time of the
transaction;

(4) Those whose object is outside the

commerce of men;
(5) Those which
impossible service;

contemplate

an

(6) Those where the intention of the

parties relative to the principal object
of the contract cannot be ascertained;
(7) Those expressly
declared void by law.

prohibited

or

These contracts cannot be ratified. Neither

can the right to set up the defense of
illegality be waived.
Art. 1410. The action or defense for the
declaration of the inexistence of a contract
does not prescribe.
Art. 1411. When the nullity proceeds from
the illegality of the cause or object of the
contract, and the act constitutes a criminal
offense, both parties being in pari delicto,
they shall have no action against each other,
and both shall be prosecuted. Moreover, the
provisions of the Penal Code relative to the
disposal of effects or instruments of a crime
shall be applicable to the things or the price
of the contract.
This rule shall be applicable when only one
of the parties is guilty; but the innocent one
may claim what he has given, and shall not
be bound to comply with his promise. (1305)
Art. 1412. If the act in which the unlawful or
forbidden cause consists does not constitute
a criminal offense, the following rules shall
be observed:
(1) When the fault is on the part of
both contracting parties, neither may

recover what he has given by virtue of

the
contract,
or
demand
the
performance
of
the
other's
undertaking;
(2) When only one of the contracting
parties is at fault, he cannot recover
what he has given by reason of the
contract, or ask for the fulfillment of
what has been promised him. The
other, who is not at fault, may
demand the return of what he has
given without any obligation to
comply his promise. (1306)
Art. 1413. Interest paid in excess of the
interest allowed by the usury laws may be
recovered by the debtor, with interest
thereon from the date of the payment.
Art. 1414. When money is paid or property
delivered for an illegal purpose, the contract
may be repudiated by one of the parties
before the purpose has been accomplished,
or before any damage has been caused to a
third person. In such case, the courts may, if
the public interest will thus be subserved,
allow the party repudiating the contract to
recover the money or property.
Art. 1415. Where one of the parties to an
illegal contract is incapable of giving
consent, the courts may, if the interest of
justice so demands allow recovery of money
or property delivered by the incapacitated
person.
Art. 1416. When the agreement is not illegal
per se but is merely prohibited, and the
prohibition by the law is designated for the
protection of the plaintiff, he may, if public
policy is thereby enhanced, recover what he
has paid or delivered.

22

Art. 1417. When the price of any article or

commodity is determined by statute, or by
authority of law, any person paying any
amount in excess of the maximum price
allowed may recover such excess.
Art. 1418. When the law fixes, or authorizes
the fixing of the maximum number of hours
of labor, and a contract is entered into
whereby a laborer undertakes to work longer
than the maximum thus fixed, he may
demand additional compensation for service
rendered beyond the time limit.
Art. 1419. When the law sets, or authorizes
the setting of a minimum wage for laborers,
and a contract is agreed upon by which a
laborer accepts a lower wage, he shall be
entitled to recover the deficiency.
Art. 1420. In case of a divisible contract, if
the illegal terms can be separated from the
legal ones, the latter may be enforced.
Art. 1421. The defense of illegality of
contract is not available to third persons
whose interests are not directly affected.
Art. 1422. A contract which is the direct
result of a previous illegal contract, is also
void
and
inexistent.

Title III. - NATURAL OBLIGATIONS

Art. 1423. Obligations are civil or natural.
Civil obligations give a right of action to
compel
their
performance.
Natural
obligations, not being based on positive law
but on equity and natural law, do not grant a
right of action to enforce their performance,
but after voluntary fulfillment by the obligor,
they authorize the retention of what has
been delivered or rendered by reason

thereof. Some natural obligations are set

forth in the following articles.
Art. 1424. When a right to sue upon a civil
obligation
has
lapsed
by
extinctive
prescription, the obligor who voluntarily
performs the contract cannot recover what
he has delivered or the value of the service
he has rendered.
Art. 1425. When without the knowledge or
against the will of the debtor, a third person
pays a debt which the obligor is not legally
bound to pay because the action thereon has
prescribed, but the debtor later voluntarily
reimburses the third person, the obligor
cannot recover what he has paid.
Art. 1426. When a minor between eighteen
and twenty-one years of age who has
entered into a contract without the consent
of the parent or guardian, after the
annulment of the contract voluntarily returns
the
whole
thing
or
price
received,
notwithstanding the fact the he has not been
benefited thereby, there is no right to
demand the thing or price thus returned.
Art. 1427. When a minor between eighteen
and twenty-one years of age, who has
entered into a contract without the consent
of the parent or guardian, voluntarily pays a
sum of money or delivers a fungible thing in
fulfillment of the obligation, there shall be no
right to recover the same from the obligee
who has spent or consumed it in good faith.
(1160A)
Art. 1428. When, after an action to enforce a
civil obligation has failed the defendant
voluntarily performs the obligation, he
cannot demand the return of what he has
delivered or the payment of the value of the
service he has rendered.

Art. 1429. When a testate or intestate heir

voluntarily pays a debt of the decedent
exceeding the value of the property which he
received by will or by the law of intestacy
from the estate of the deceased, the
payment is valid and cannot be rescinded by
the payer.
Art. 1430. When a will is declared void
because it has not been executed in
accordance with the formalities required by
law, but one of the intestate heirs, after the
settlement of the debts of the deceased,
pays a legacy in compliance with a clause in
the defective will, the payment is effective
and
irrevocable.

Title IV. - ESTOPPEL (n)

Art. 1431. Through estoppel an admission or
representation is rendered conclusive upon
the person making it, and cannot be denied
or disproved as against the person relying
thereon.
Art. 1432. The principles of estoppel are
hereby adopted insofar as they are not in
conflict with the provisions of this Code, the
Code of Commerce, the Rules of Court and
special laws.
Art. 1433. Estoppel may be in pais or by
deed.
Art. 1434. When a person who is not the
owner of a thing sells or alienates and
delivers it, and later the seller or grantor
acquires title thereto, such title passes by
operation of law to the buyer or grantee.
Art. 1435. If a person in representation of
another sells or alienates a thing, the former

23

cannot subsequently set up his own title as

against the buyer or grantee.

Art. 1439. Estoppel is effective only as

between the parties thereto or their
successors in interest.

Art. 1436. A lessee or a bailee is estopped

from asserting title to the thing leased or
received, as against the lessor or bailor.
Art. 1437. When in a contract between third
persons concerning immovable property, one
of them is misled by a person with respect to
the ownership or real right over the real
estate, the latter is precluded from asserting
his legal title or interest therein, provided all
these requisites are present:
(1)
There
must
be
fraudulent
representation
or
wrongful
concealment of facts known to the
party estopped;
(2) The party precluded must intend
that the other should act upon the
facts as misrepresented;
(3) The party misled must have been
unaware of the true facts; and
(4) The party defrauded must have
acted
in
accordance
with
the
misrepresentation.
Art. 1438. One who has allowed another to
assume apparent ownership of personal
property for the purpose of making any
transfer of it, cannot, if he received the sum
for which a pledge has been constituted, set
up his own title to defeat the pledge of the
property, made by the other to a pledgee
who received the same in good faith and for
value.

24

Art.
1106
Art.
1107
Art.
1108
Art.
1109
Art.
1110
Art.
1111

Prescription acquisition/loss through lapse of time

Persons capacitated to acquire through prescription; minors
and incapacitated
Persons against whom prescription run
No prescription between husband and wife, parents and
children (minority/insanity), guardians and wards
Against a married woman
Prescription obtained by co-proprietor/co-partner

25

Art.
1112
Art.
1113
Art.
1114
Art.
1115
Art.
1116
Art.
1117
Art.
1118
Art.
1119
Art.
1120
Art.
1121
Art.
1122
Art.
1123
Art.
1124
Art.
1125
Art.
1126
Art.
1127
Art.
1128
Art.
1129
Art.
1130
Art.
1131
Art.
1132
Art.
1133
Art.
1134

Renunciation of prescription already obtained

Prescription: things within the commerce of man; not nonpatrimonial property of state
Prescription despite renunciation of debtor (eg. guarantors
right)
No prejudice to other provisions
Transitory provision: shorter period
Acquisitive prescription: ordinary (possession in good faith +
just title), extraordinary
Adverse possession: in concept of an owner, public, peaceful,
uninterrupted
Possession: license or tolerance of owner no prescription
Interruption: Naturally or civilly
Natural interruption more than one year, not revived if same
adverse claimant
Natural interruption (effect): one year or less in favour of
prescription
Civil interruption receipt of judicial summons
Judicial summons deemed not issued
Possessors recognition of owners rights interruption
Title recorded in Registers of Property, Land Registration Act
Good faith reasonable belief that the person from whom he
received the property is the owner
Conditions of good faith
Just title adverse claim of possession through modes
recognized by law
Title true and valid
Title must be proven
Prescription of movables: ordinary 4years, extraordinary 8
years; owners right to recover
No prescription for movables possessed through a crime
Immovable property: ordinary prescription 10 years

26

Art.
1135
Art.
1136
Art.
1137
Art.
1138

Discrepancy in measurement of the land/area prescription

will be based on possession
Possession in wartime/ civil courts closed in favour of
prescription
Immovables: extraordinary prescription 30 years

Art.
1139
Art.
1140
Art.
1141
Art.
1142
Art.
1143
Art.
1144
Art.
1145
Art.
1146
Art.
1147
Art.
1148
Art.
1149
Art.
1150
Art.
1151
Art.
1152
Art.
1153

Prescription of action (civil actions)

Art.
1154
Art.
1155
Art.
1156

Computation of time

Action to recover movables 8 years (unless property already

prescribed in 4 years Art. 1132)
Action to recover immovables 10 years ( unless property
already prescribed in 10years Art. 1134)
Mortgage action 10 years
Actions which do not prescribed: right of way, and abate a
public or private nuisance
Actions prescribing in 10 years written contract, obligation by
law, judgment
Actions prescribing in 6 years oral contract, quasi-contract
Actions prescribing in 4 years injury to the rights of the
plaintiff, quasi-delict
Actions prescribing in 1 year- forcible entry and detainer,
defamation
Art. 1140-47 without prejudice to other provisions, code of
commerce, special laws
Actions with no fixed period 5 years
Prescription, without provision to the contrary, shall be counter
from the day it may be brought
Action to enforce obligation to pay principal with interest or
annuity from day of last payment
Action to enforce obligation by virtue of judgment from day
of finality of judgment
Action for accounting from the day accounting ceased; result
of accounting from day result recognized by interested
parties
Time when oblige was prevented by fortuitous event from
enforcing his rights not counted against him
Prescription of action interrupted: case filed in court, written
extrajudicial demand, written acknowledgment of debt
Obligation

27

Art.
1157
Art.
1158
Art.
1159
Art.
1160
Art.
1161
Art.
1162
Art.
1163
Art.
1164
Art.
1165

Art.
1166
Art.
1167
Art.
1168
Art.
1169
Art.
1170
Art.
1171
Art.
1172
Art.
1173
Art.
1174
Art.
1175
Art.
1176
Art.

Sources of obligation (law, contracts, quasi-contracts, crimes,

quasi-delicts
Law never presumed (clear, specific, exact)
Contracts need compliance in good faith
Quasi-contracts
Crimes civil liability attaching to crimes
Quasi-delicts (torts) negligence resulting to damages
Duty to take care diligence of a good father of a family
Rights to the fruit
Determinate: specific performance to deliver + damages;
indeterminate: compliance at the expense of debtor; obligor
delays or promised the object to 2 persons: responsible for
fortuitous events until delivery (exception to the rule on
fortuitous event)
Delivery of determinate includes accessions and accessories
Failure to do done at his cost; not required to be done may
be undone
Obligation not to do, but was done undo at obligors expense
Delay from time oblige demands ; cases when no demand is
necessary
Damages fraud, negligence, delay, contravention of tenor of
contract
Fraud in the performance of obligation waiver for future fraud
is void
Negligence
Negligence in the omission of diligence with bad faith = fraud
Fortuitous event
Usurious transactions
Receipt of principal without reservation presumption: interest
has been paid
Receipt of later instalment presumption: prior instalments
has been paid
Creditors may go against debtors of the debtors

28

1177
Art.
1178
Art.
1179
Art.
1180
Art.
1181
Art.
1182
Art.
1183
Art.
1184
Art.
1185
Art.
1186
Art.
1187
Art.
1188
Art.
1189
Art.
1190
Art.
1191
Art.
1192
Art.
1193
Art.
1194
Art.
1195
Art.
1196
Art.
1197
Art.
1198
Art.

Rights acquired by virtue of obligation transmissible

Pure obligation; obligation with resolutory condition
demandable at once
To pay when means permit him to do so deemed to be with a
period (court)
Conditional obligation
Fulfilment of condition depending on will of debtor obligation
void; chance and will of third person
Impossible obligation annul obligation save for parts of
divisible obligation
Condition: at a determinate time happening extinguish
Condition: at a determinate time not to happen effective
Acts of prevention by obligor constructive fulfilment
Effects of suspensive condition retroact to the day of
constitution of obligation appropriate fruits and interests;
reciprocal obligation mutual compensation
Creditor preservation of right prior fulfilment; recover
payment by mistake
Rules in case of improvement, loss or deterioration
Condition: purpose is for extinguishment of obligation to give
return what they have received
Rescission of contract implied in reciprocal obligation;
creditor choice between rescission or fulfilment +damages;
without prejudice to 3rd persons
Both parties breached the contract: 1st infractor; if cant be
determined- bear own damages, exting.
Obligations with a period
Loss, deterioration, improvement Art. 1189
Anything paid by mistake before due may be recovered with
fruits and interests
Period presumed as established for creditor and debtor
unless otherwise stated
No period, depend on will of debtor - court
Debtor lose right to period in the following cases...
(guarantees/sureties, abscond)
Alternative obligation complete performance of one; creditor

29

1199
Art.
1200
Art.
1201
Art.
1202
Art.
1203
Art.
1204
Art.
1205
Art.
1206
Art.
1207
Art.
1208
Art.
1209
Art.
1210
Art.
1211
Art.
1212
Art.
1213
Art.
1214
Art.
1215
Art.
1216
Art.
1217
Art.
1218
Art.
1219
Art.
1220

cant be compelled to receive partial

Right of choice debtor; no right to choose: impossible,
unlawful, not the object of obligation
Choice no effect until communicated
Lose right of choice when only one is practicable
Creditors prevents choice of debtor debtor may rescind
Indemnity for loss/impossibility through the fault of debtor
value of last thing which disappeared + other damages
Creditors choice ceases to be alternative upon
communication to debtor
Responsibilities of debtor in case of loss of objects
Facultative obligation one prestation agreed upon with
substitute; deterioration of substitute
Solidary liability only when expressly stated, or by law of
nature of obligation
Absent stipulation/law/nature joint obligation divided into
shares
Joint indivisible obligation creditors must act collectively
Indivisibility of obligation does not give rise to solidarity and
vice versa
Solidary even if bound is different manner, period, condition
Each solidary creditor may do what may be useful to the
others
Solidary creditor cant assign his rights with consent of others
Debtor may pay any creditor, if demand was made, pay
creditor who demanded
Novation, compensation, confusion or remission of the debt
extinguish liability towards others
Creditor may proceed after any one/some/all of solidary debtor
Payment by one debtor extinguishes obligation, creditor may
choose whose offer to accept, debtor may reimburse from
other debtor, insolvency shouldered by others in proportion
to debt
Payment made after prescription/illegal no reimbursement
Remission by creditor debtor still responsible to co-debtors
Remission of whole obligation no reimbursement

30

Art.
1221
Art.
1222
Art.
1223
Art.
1224
Art.
1225
Art.
1226
Art.
1227
Art.
1228
Art.
1229
Art.
1230
Art.
1231
Art.
1232
Art.
1233
Art.
1234
Art.
1235
Art.
1236
Art.
1237
Art.
1238
Art.
1239
Art.
1240
Art.

Object lost/impossible without fault of solidary debtors

extinguished; with fault all responsible + action against
guilty debtor; fortuitous after impossible/ delay all
responsible + action
Solidary debtor all defences from nature of obligation or
personal
Divisibility/indivisibility + one debtor and one creditor
chapter2
Joint divisible obligation indemnity any time one debtor fail to
comply, those ready to pay shall no contribute
Indivisible: definite things insusceptible of partial performance;
divisible: measurable/partial (unless stipulated otherwise); not
to do character of obligation
Penal clause penalty substitute indemnity + interest;
damages refuse to pay penalty or fraud
Cants exempt from performance by paying penalty; not
simultaneous with performance
Proof of actual damages not necessary
Judge equitably reduce penalty (iniquitous and
unconscionable)
Nullity of penal clause no nullity of principal; nullity of
principal nullity of penal
Extinguishment of obligation
Payment
Not deemed paid unless thing/service has been completely
delivered
Substantial performance in good faith deemed as fulfilled +
damages
Acceptance of substantial performance without express
protest fulfilled + no damages
Creditor not bound to accept payment by 3rd persons; 3rd
person may reimburse from debtor except when paid without
knowledge and consent recover only whats beneficial
Payment by 3rd person without knowledge/consent no
subrogation of rights
Payment by 3rd person without intent to reimbursement =
donation need consent
Payment by person with no free disposal not valid ; minors
can
Payment to = person in whose favour obligation was
constitutes, successors in interest, authority
Payment to incapacitated person valid kept the thing,

31

1241
Art.
1242
Art.
1243
Art.
1244
Art.
1245
Art.
1246
Art.
1247
Art.
1248
Art.
1249
Art.
1250
Art.
1251
Art.
1252
Art.
1253
Art.
1254
Art.
1255
Art.
1256
Art.
1257
Art.
1258
Art.
1259
Art.
1260
Art.
1261
Art.
1262

beneficial; benefit need not be proven in...

Payment in good faith to person in possession of credit
release from obligation
Payment after judicial order to retain debt invalid
Debtor cant compel creditor to receive a different object;
cant be substituted by another act against will of oblige
Dation in payment
Indeterminate/ generic cant demand superior quality or
accept inferior quality
Extrajudicial cost debtor; judicial cost court
Creditor cant be compel to accept partial prestation/ debtor to
make partial payment; part liquidated and part unliquidated
Payment of debts in money stipulated currency or phil.
currency; mercantile documents as payment only when
encashed, impaired through fault of debtor
Extraordinary inflation/deflation value at time of constitution
of obligation, unless otherwise
Place of payment stipulation, location of thing, domicile of
debtor change in domicile in bad faith or after delay cost by
debtor
Various debts, same kind, same creditor declaration, due;
accepts a receipt cant complain after
Debt with interest principal not paid until interest are
covered
Most onerous debt; all of same nature payment applied
proportionately
Cession assign property in payment of debts; released for
net proceeds
Consignation creditor to whom tender of payment made
refuses without just cause; consignation alone in cases...
1st notification to persons interested in fulfilment
Consignation made by depositing thing due to judicial
authority; 2nd notification
Expenses of consignation creditor
Withdraw consigned object: before creditor accepted, before
judicial declaration obligation remain
Creditor authorize the debtor to withdraw lose preference
over the thing, co debtors, sureties, guarantors released
Determinate lost/destroyed w/o fault of debtor, before delay
extinguished; responsible for fortuitous law, stipulation, risk

32

Art.
1263
Art.
1264
Art.
1265
Art.
1266
Art.
1267
Art.
1268
Art.
1269
Art.
1270
Art.
1271
Art.
1272
Art.
1273
Art.
1274
Art.
1275
Art.
1276
Art.
1277
Art.
1278
Art.
1279
Art.
1280
Art.
1281
Art.
1282
Art.
1283

damages
Generic: loss/destruction not extinguished
Courts - partial loss is so important as to extinguish obligation
Lost in possession of debtor presumption of fault except in
earthquake, flood, storm (calamity)
Prestation becomes legally/physically impossible w/o fault of
debtor released in whole or part
Service has become so difficult as to be manifestly beyond the
contemplation of the parties same
Debt of thing certain criminal offense loss no exemption;
unless offered back and creditor refused w/o justification
Creditor have all rights of action of debtor against 3rd persons
by reason of loss (insurance)
Condonation/remission requires acceptance
(express/implied)
Delivery of private document (credit) remission; defense
against claim of inofficiousness voluntary delivery by virtue
of payment
Private document in possession of debtor presumption of
voluntary delivery
Renunciation of principal = also accessory
Presumption of remittance of pledge if found in possession of
debtor/owner
Confusion/merger creditor and debtor in one and same
person
Merger of principal debtor and creditors release guarantor;
debtor/creditor and guarantor not extinguished
Confusion does not extinguish joint obligation; only extent of
share
Compensation 2 persons are creditors and debtors of each
other
Requisites
Guarantor may set up compensation as regards what the
creditor may owe the principal debtor
Total or partial compensation
May agree upon compensation of debts not yet due
Judicial set-off (damages)

33

Art.
1284
Art.
1285
Art.
1286
Art.
1287
Art.
1288
Art.
1289
Art.
1290

Compensation before rescission/nullity of obligation

Art.
1291
Art.
1292
Art.
1293
Art.
1294

Novation: change object/principal condition, substitution

debtor, subrogation of creditor
Expressed in unequivocal terms, or that the old and new
obligations be on every point incompatible with each other
Substituting a debtor without his consent, but always with
consent of creditor
Substitution without knowledge/against the will of debtor
insolvency/non-fulfilment of new debtor no liability on old
debtor
Substitution with consent creditor can go after debtor if
insolvency was existing and of public knowledge, or known to
the debtor when he delegated his debt
Accessory obligation may subsist in so far as they benefit 3rd
persons who do not consent to novation
New obligation is void, old will subsist; unless intended
otherwise
Novation is void if original obligation is void, except before
annulment/when ratified
Same suspensive/resolutory condition

Art.
1295
Art.
1296
Art.
1297
Art.
1298
Art.
1299
Art.
1300
Art.
1301
Art.
1302
Art.13
03
Art.
1304

Assignment of credit by the creditor to 3rd person

Compensation by operation of law regardless of place;
indemnity for expenses of transpo partial
Not proper in case of debts: from depositorium, bailee in
commodatum, support for gratuitous title
No compensation in civil liability from penal offense
Order of compensation follow order of payment
Requisites in Art. 1279 present compensation by operation of
law

Subrogation of 3rd person in the rights of creditor legal or

conventional. Legal not presumed
Conventional subrogation needs consent of 3d person and
original parties
Legal subrogation in cases: creditor to creditor credit buy off,
disinterested 3rd person w/ consent of debtor, interested
person even w/o consent of debtor
Subrogation transfers to the subrogated person the credit with
all the rights of creditor
Creditor to whom partial payment was given preferred over
subrogated ( for reimbursement) partial payment by 3rd

34

Art.
1305
Art.
1306
Art.
1307
Art.
1308
Art.
1309
Art.
1310
Art.
1311
Art.
1312
Art.
1313
Art.
1314
Art.
1315
Art.
1316
Art.
1317
Art.
1318
Art.
1319
Art.
1320
Art.
1321
Art.
1322
Art.
1323
Art.
1324
Art.
1325
Art.
1326
Art.

person w/ consent
Contract meeting of the minds, to bind one self to perform
an obligation
Freedom to contract
Innominate contracts no specific name/ delagtion in law (by
analogous nominate contract)
Contracts bind both parties
Determination of performance by 3rd person
If determination is evidently inequitable the courts shall
decide what is equitable
Persons affected by a contract (G: parties, assigns, heirs; E: by
nature, stipulation, law); stipulation pour atrui
3rd persons are bound by contracts creating real rights
Right of creditors to impugn contracts intended to defraud
them
Liability of 3rd person responsible for breach of contract,
induces another
Perfection of contracts: consensual, real, solemn
Perfection of real contracts delivery (deposit, pledge,
commodatum)
Unauthorized contracts are unenforceable unless ratified
Requisites of a contract: consent, object, cause
Consent (offer, acceptance, counter-offer)
Acceptance express of implied
Offerer may fix the time, place, and manner of acceptance
Offer made through an agent acceptance communicated to
agent
Offer becomes ineffective death, civil interdiction, insanity,
insolvency before acceptance
Option contract, option period, option money
G: Business advertisements are invitations to make an offer
G: advertisements for bidders are invitations to make
proposals
No capacity of give consent: minors, insane or demented,

35

1327
Art.
1328
Art.
1329
Art.
1330
Art.
1331
Art.
1332
Art.
1333
Art.
1334
Art.
1335
Art.
1336
Art.
1337
Art.
1338
Art.
1339
Art.
1340
Art.
1341
Art.
1342
Art.
1343
Art.
1344
Art.
1345
Art.
1346
Art.
1347
Art.
1348
Art.
1349

deaf-mute and illiterate

Contracts: during a lucid interval valid; during hypnotic
spell/state of drunkenness voidable
Above incapacity is subject to modifications by law (Rules of
Court)
Consent through mistake, violence, intimidation, undue
influence, or fraud voidable
Mistake or error should be substantial
Burden of prf in case of mistake or fraud person enforcing
the contract (in case one of the parties is unable to read, in
language not understood by him)
No mistake knowledge of risk, doubt, contingency
Mutual error (in mistake of law)
Violence and intimidation
Violence or intimidation by a 3rd person
Undue influence
Fraud (Causal fraud)
Fraud by concealment
Usual exaggerations in trade (dealers/traders talk)
Expression of opinion
Misrepresentation by 3rd persons
Misrepresentation in good faith
Causal fraud and incidental fraud
Simulation of contract (absolute of relative)
Absolutely simulated void; relatively simulated (no prejudice
to 3rd persons, not contrary...) valid
Object of a contract
Impossible things/service cant be the object
Object must be determinate as to its kind

36

Art.
1350
Art.
1351
Art.
1352
Art.
1353
Art.
1354
Art.
1355
Art.
1356
Art.
1357
Art.
1358
Art.
1359
Art.
1360
Art.
1361
Art.
1362
Art.
1363
Art.
1364
Art.
1365
Art.
1366
Art.
1367
Art.
1368
Art.
1369
Art.
1370
Art.
1371
Art.

Cause: onerous prestation/promise of thing or servicel

remuneratory service/benefit remunerated; contracts of pure
beneficence liberality of benefactor
Motives
No cause no effect; unlawful cause
False cause void (if founded on another cause which is true
and lawful)
Cause presumed to exists and lawful (unless debtor proves
the contrary)
Lesion or inadequacy of cause doesnt invalidate contract
(unless F,M, UI)
Form of contract (G: obligatory in any form)
When the law requires for the contract to be in a
document/other special form
Public document
Reformation of instrument
Principles of the general law on reformation (note: new civil
code will prevail in case of conflict)
Mutual mistake as basis of reformation
Mistake on one side, fraud/inequitable conduct on the other
reformation by good faith party
Concealment of mistake by the other party reformation by
good faith party
Ignorance, lack of skill, negligence, bad faith on person
drafting reformation by either party
Mortgage or pledge stated as sale reformation
No reformation: simple donation inter vivos, wills, real
agreement is void
No reformation: when one of the parties has brought an action
to enforce the instrument
Party entitled to reformation: party, successors in interest
(mutual mistake); injured party, heirs, assigns
Procedure for reformation Rules of Court (7, Rule 130)
If words are clear literal meaning; if in the contrary
intention of the parties
Intention: contemporaneous and subsequent acts
Special intent over general intent

37

1372
Art.
1373
Art.
1374
Art.
1375
Art.
1376
Art.
1377
Art.
1378
Art.
1379
Art.
1380
Art.
1381
Art.
1382
Art.
1383
Art.
1384
Art.
1385
Art.
1386
Art.
1387
Art.
1388
Art.
1389
Art.
1390
Art.
1391
Art.
1392
Art.
1393
Art.
1394
Art.

Interpretation of stipulation with several meanings one which

will render it effectual
Contract should be interpreted as a whole
Words with different significations understood in that which
is most in keeping with nature/object
Usage and custom as aid in interpretation
Interpretation of obscure words or stipulations not to favour
party who caused obscurity
Rules in case doubts are impossible to settle
Principles of interpretation Rule 123 of Rules of Court
Rescissible contracts: valid up to the time they are rescinded
validly agreed upon
Rescissible contracts
Payments made in a state of insolvency rescissible
Action for rescission is subsidiary
Rescission: only to the extent necessary to cover damages
G: mutual restitution; E: if not possible, legally in the
possession of 3rd persons in good faith
No rescission in Art. 1381 (1,2) in contracts approved by
courts
Alienation presumed in fraud of creditors: gratuitous titles and
onerous title
Liability of purchaser in bad faith return, indemnify
Action for rescission: 4 years
Voidable/annullable contracts: legal incapacity to give
consent, vitiation of consent; ratification
Action for annulment: 4 years
Ratification (extinguishes action to annul)
Ratification: express or tacit/implied
Ratification by guardian of incapacitated person
Conformity of guilty party to ratification is not required

38

1395
Art.
1396
Art.
1397
Art.
1398
Art.
1399
Art.
1400
Art.
1401
Art.
1402
Art.
1403
Art.
1404

Ratification cleanses the contract of all its defects

Party entitled to bring action to annul
Duty of mutual restitution upon annulment
Restitution by incapacitated person: not obliged except in so
far as he has been benefited
Loss of thing to be returned: fruits + value of the thing at the
time of loss + interest from date of loss
Extinguishment of action for annulment if object is lost
through fraud or fault of plaintiff
Inability to restore no obligation to restore for the other party
Unenforceable contracts (ratification)

39