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Obligations and Contracts

Finals Reviewer


1. What is a contract?

Ans: A contract is a meeting of minds between 2 persons whereby one binds

himself, with respect to the other, to give something or to render some service.

2. What are the different stages of contract?

Ans: The life of a contract has 3 phases or stages

a. Preparation preliminary or preparatory process for the formation of the


b. Perfection the birth of the contract;

c. Consummation the fulfilment of the purpose of which the contract was


3. What are the essential characteristic of contracts?


a. Obligatory force or character of contracts the principle that once a

contract is perfected, it shall be of obligatory force upon both of the
contracting parties;

b. Autonomy of contracts principle that the contracting parties are free to

enter into a contract and to establish such stipulations, clauses, terms and
conditions as they may deem convenient;

c. Mutuality of contracts the essential equality of the contracting parties

whereby the contract must bind both of them;

d. Relativity of contracts principle that the contract takes effect only

between the parties, their assigns and heirs.

4. What is stipulation pour atrui? What are the requisites?


Stipulation pour atrui may be defines as a stipulation in a contract, clearly

and deliberately conferred by the contracting parties as a favor upon third
person, who must communicate his acceptance of the favor or benefit to the
obligor before it could be revoked.


1. There must be a stipulation in favor of a third person;

2. The stipulation must be a part, not the whole, of the contract;

3. The contracting parties must have clearly and deliberately conferred in

favor upon a third person, not a mere incidental benefit or interest;
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4. The third person must have communicated his acceptance to the obligor
before its revocation;

5. Neither of the contracting parties bears the legal representation or

authorization of the third party.

5. What are the essential requisites of a contract?

Ans: 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;

3. Cause of the obligation which is established.

6. What are the different classes of fraud?

Ans: In general, fraud may be classified as civil or criminal, depending upon

whether it is governed by the NCC or by the Revised Penal Code. Civil fraud
may be classified as either fraud in the perfection of a contract or fraud in
the performance of a contract or fraud in the performance of an
obligation. The first is the fraud which is employed by a party to the contract
in securing the consent of the other party, while the second is the fraud
which is employed by the obligor in the performance of an existing obligation.

7. Distinguish between dolo causante and dolo incidente.

Ans: Dolo causante and dolo incidente may be distinguished from each other
in the following ways:

1. The first refers to a fraud which is serious in character, whereas the

second is not serious.

2. The first is the cause which induces the party upon whom it is employed in
entering into the contract, whereas the second is not the cause.

3. The effect of the first is to render the contract voidable, whereas the effect
of the second is to render the party who employed it liable for damages.

8. What are the two types of simulation of contracts?


The simulation is absolute when there is colorable contract but it has

no substance as the contracting parties do not intend to be bound by the
contract at all. The basic characteristic of this type of simulation of contract
is the fact that the apparent contract is not really desired or intended to
produce legal effects or in any way alter the juridical situation of the parties.

It is relative when the contracting parties state a false cause in the

contract to conceal their true agreement. The primary consideration in
determining the true nature of a contract is the intention of the parties. Such
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intention is determined from the express terms of their agreement as well as
from their contemporaneous and subsequent acts.

9. When form of contract is necessary?

Ans: Whatever may be the form in which a contract may have been entered
into, the general rule, according to Art. 1356 of the NCC, is that it shall be
obligatory provided all of the essential requisites for its validity are present.

10. What are the different classes of defective contracts

Ans: There are four classes of defective contracts under the present NCC.
They are:

1. Rescissible contracts;

A rescissible contract is a contract which is valid because it contains all

of the essential requisites prescribed by law, but which is defective
because of injury or damage to either of the contracting parties or to
third persons, as a consequence of which it may be rescinded by means
of a proper action for rescission.

2. Voidable Contracts;

Voidable contracts are those in which all of the essential elements for
validity are present, but the element of consent is vitiated either by lack
of legal capacity of one of the contracting parties, or by mistake,
violence, intimidation, undue influence or fraud.

3. Unenforceable contracts; and

Unenforceable contracts are those which cannot be enforced by a proper

action in court, unless they are ratified, because either they are entered
into without or in excess of authority or they do not comply with the
Statute of Frauds or both of the contracting parties do not possess the
required legal capacity.

4. Void and inexistent contracts

Void and inexistent contracts may be defined as those which lack

absolutely either in fact or in law one or some or all of those elements
which are essential for its validity.

Void contracts contracts where all of the requisites prescribed by law

for are present, but the cause, object or purpose is contrary to law,
moral, good customs, public order or public policy, or they are
prohibited by law, or they are declared by law to be void.

Inexistent contracts contracts which lack absolutely one or some of

all those requisites which are essential for validity.

11. What are the formalities which are necessary for the validity of contracts?


Contracts which must appear in writing are as follows:

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1. Donations of personal property whose value exceeds P5,000;

2. Sale of a piece of land or any interest therein through an agent;

3. Agreements regarding payment of interest in contracts of loan;

4. Antichresis.

Contracts which must appear in a public document are as follows:

1. Donations of immovable property;

2. Partnership where immovable property or real rights are contributed to

the common fund.

Contracts which must be registered are as follows:

1. Chattel mortgages;

2. Sales or transfers of large cattle.

12. How may a voidable contract be convalidated?

Ans. There are three (3) ways or modes of convalidating a voidable contract.
They are: (1) by prescription of the action for annulment; (2) by
ratification or confirmation; and (3) by the loss of the thing which is the
object of the contract through the fraud or fault of the person who is entitled
to institute the action for the annulment of the contract.

13. What is estoppel? What are the different kinds of estoppel?


Estoppel is a condition or state by virtue of which an admission or

representation is rendered conclusive upon the person making it, and cannot
be denied or disproved as against the person relying thereon.


1. Estoppel in pais arises when one by his acts, representations or

admission, or by his silence when he ought to speak out, intentionally
or through culpable negligence, induces another to believe certain facts
to exist and such other rightfully relies and acts on such belief, as a
consequence of which he would be prejudiced if the former is permitted
to deny the existence of such facts.

2. Estoppel by deed or by record occurs when a party to a deed and his

privies are precluded from denying any material fact stated in the said
deed as against the other party and his privies.

3. Estoppel by laches a person who failed or neglected to assert a right

for an unreasonable and unexplained length of time is presumed to
have abandoned or otherwise declined to assert such right. He cannot
later on seek to enforce the same, to the prejudice of the other party,
who has no notice or knowledge that the former would assert such
rights and whose condition has so changed that the latter cannot,
without injury or prejudice, be restored to his former state.
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14. What is the period of prescription of an action for reconveyance or real

property based on an implied trust?

Ans: It depends.

1. If the action for reconveyance involves the annulment of a voidable

contract which became the basis for the fraudulent registration of the
subject property, then the period of prescription is four (4) years from
the discovery of the fraud.

2. If the action does not involve the annulment of a contract, but there was
fraud in the registration of the subject property, then the period of
prescription is ten years from the discovery of the fraud.

3. If the action involves the declaration of the nullity or inexistence of a

void or inexistent contract which became the basis for the fraudulent
registration of the subject property, then the action is imprescriptible.

4. If the action for reconveyance is in reality an action to quiet title and the
legitimate owner of the subject property which was fraudulently
registered in the name of another had always been in possession thereof
do that the constructive notice rule cannot be applied, then the action is

15. What is estoppel by judgment? How is it distinguished from res judicata?

Ans: It may defined as the preclusion of a party to a case from denying

the facts adjudicated by a court of competent jurisdiction. Estoppel by
judgment bars the parties from raising any question that might have been
put in issue and decided in a previous litigation, whereas res judicata
makes a judgment conclusive between the same parties as to the matter
directly adjudged.

CASES: (Guys, paadd ng mga answers. Di ako confident ditey.)

1. In the case of Cui vs. Arellano University, A brought an action to recover the
amount which he paid . Will the action prosper?


Yes, the action will prosper. The waiver signed by A is contrary to public
policy, and therefore, null and void. The Supreme Court in one case, had the
occasion to rule that scholarship grants, are awarded in recognition of merit
and not to attract and keep brilliant students in school for their propaganda
value. To look at such grants as a business scheme designed to increase the
business potential of an educational institution is not only inconsistent with
sound policy but also good morals.

2. A wrote a letter to B offering his property on May 8, 2017. On May 9, 2017 at

6:00 A.M., B sent a letter of acceptance which was received by A at 9:00 A.M.
that day. But at 7:00 A.M., A had already sent B a letter of withdrawal of the
offer which was received by B at 10:00 A.M. Was the contract perfected?
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No. The contract has not been perfected. By express provision of the
law, the contract is perfected only from the moment that the offeror has
knowledge of the acceptance by the offeree. Under the facts stated in the
problem, A received the letter of acceptance at 9:00 A.M. But two (2) hours
before that, at 7:00 A.M., he had already sent the letter to B withdrawing the
offer. Consequently, at 9:00 A.M., although there was acceptance, there was
no longer any offer.

3. In 2010, D borrowed 500,000 fro C. It is evidenced by a promissory note

wherein D promised to pay within two years. When the promissory note
matured, A, a friend of D, assumed the payment of debt within 6 months. Mr.
A did not pay. C decided to bring an action against A. Will such an action


Yes, the action will prosper. It is well-settled that a special

promise to answer for the debt, default or miscarriage of another is order to
fall within the operation of Statute of Frauds should be collateral not
independent or original. In the same token, the promise of A is independent or