Real vs.

Consensual Contracts; Forms, Reformation and Interpretation – Civil

Code, arts. 1356-1379
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)
Rules regarding form of contracts.
(1) General rule - Contracts are binding and, therefore, enforceable reciprocally by the
contracting parties, whatever may be the form in which the contract has been entered
into, provided all the three (3) essential requisites (consent, object, and cause) for their
validity are present. So, a contract may be oral or written. A written contract may consist
of a letter, memorandum, note or other instrument, without following any particular form
or language, it being sufficient that the parties clearly express their intentions.
ART. 1357. If the law requires a document or other special form, as in the act and
contract 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)
Form for the convenience of the parties.
In certain cases, a certain form (e.g., public instrument) is required for the convenience
of the parties in order that the contract may be registered in the proper registry to make
effective, as against third persons, the right acquired under such contract. Non-
compliance with the required form would not adversely affect the validity nor the
enforceability of the contract between the parties themselves.
As between the parties, the form is not indispensable since they are allowed by law to
compel the other to observe the proper form and this right may be exercised
simultaneously with the action to enforce the contract. It is essential, however, before a
party may be compelled to execute the required form, that the contract be both valid
and enforceable. (see Dauden-Hernaez vs. De Los Angeles, 27 SCRA 1276.
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 are 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 proceed- ing 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)
ARTICLE 1359 reformation- 1st paragraph- there is a meeting of minds but what is
written in their written agreement is or was not agreed upon.
annulment- 2 paragraph-wala talagang meeting of minds. vitiated or void ang consent.
requisites of reformation:
1. there must be meeting of minds
2. the true intention is not expressed in the written instrument.
3. The failure of intention is due to mistake, fraud, inequitable conduct or accident.
4. there must be clear and convincing proof.
ARTICLE 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 civil Code.
ARTICLE 1361 Reformation is a remedy in equity in which a written instrument is
made to confirm the real intention of the parties when some error or mistake is
committed. This article applies when the mistake is mutual that is both parties
committed the same mistake which caused the failure of the instrument to
express their true agreement
Requisites: A-The mistake is a mistake of fact B- The proof of the mistake must be a
clear and convincing C-The mistake should be common to both contracting parties
example
Article 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.
Article 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.
Article 1364 When through 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 ir personal property,
but the instrument states that the property is sold absolutely or with a right of
repurchase, reformation of the instrument is proper. MORTGAGE OR PLEDGE
STATED AS A SALE. Under this article, the reformation if the instrument is proper;
otherwise, the true intention of the parties would be frustrated. Such true intention must
prevail for the contract must be complied with in good faith
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 IF THE PARTIES HAS BROUGHT AN ACTION TO
ENFORCE THE INSTRUMENT, HE CANNOT SUBSEQUENTLY ASK FOR IT'S
REFORMATION.
CASE WHEN REFORMATION NOT ALLOWED.
1. Simple donations inter vivos no condition is imposed.
2. Wills
3. When the real agreement is void.
4. When one party has brought an action to enforce the instrument.
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.
Party entitled to reformation.
The above article enumerates the persons who can bring an action to reform an
instrument:
(1) Either of the parties, if the mistake is mutual under Articles 1361, 1364, and
1365;
(2) In all other cases, the injured party, under Articles 1362, 1363, 1364 and
1365; and
(3) The heirs or successors in interest, in lieu of the party entitled. (Art. 1368.)
ART. 1369. The procedure for the reformation of instruments shall be governed
by rules of court to be promulgated by the Supreme Court.
Procedure for reformation.
The Rules of Court governs procedure. However, the Supreme Court has not as yet
promulgated the procedure for the reformation of instruments. (see Sec. 7, Rule 130,
Rules of Court)
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)
Meaning of interpretation of contracts.
Interpretation of a contract is the determination of the meaning of the terms or
words used by the parties in their written contract. It is the process of ascertaining the
intention of the parties from the written words contained in their contract.
Article 1371. In order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally considered.
Article 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.
Article 1372 NCC | speaks of… Special intent over general intent Even if the terms used
in the contract/agreement may be general, the interpretation should NOT ever be far
from the intention of the parties; that intention to be determined by accident to
circumstances. GENERAL RULE | Where in a contract there are general and special
provisions covering the same subject matter that are inconsistent, special provisions
prevail over general provisions when the two CANNOT stand together.
Article 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.
Article 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.
INTERPRETATIONS OF VARIOUS STIPULATIONS OF A CONTRACT
A contract must be interpreted as a whole and the intention of the parties is to be
gathered from the entire instrument and not from particular words, phrases, or clauses.
All provisions should, if possible, be so interpreted as to harmonize with each other.

ARTICLE 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 customs 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)
Article 1377. The interpretation of obscure words or stipulations in a contract
shall not Favor the party who caused the obscurity. (1288)
Article 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.
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.
Article 1379. The principles of interpretation stated in Rule 123 of the Rules of
Court shall likewise be observed in the construction of contracts.
DEFECTIVE CONTRACTS

Art. 1380. Contracts validly agreed upon may be rescinded in the cases
established by low Meaning of Rescissible Contracts
Rescissible - contracts are those validly agreed upon because all the essential elements
exist and therefore, legally effective, but in the cases established by law, the remedy of
rescission is granted in the interest of equity.
Art 1382. Payments made in a state of insolvency for obligations to whost
fulfillment the debtor could not be compelled at the time they were affected are
also rescissible
Art 1383. The action for rescission is subsidiary: it cannot be instituted except
when the porty suffering damage has no other legal means to obtain reparation
for the some
Art 1384. Rescission shall be only to the extenct necessary to cover the damages
caused.
when Rescission is not allowed
Ar 1385. Rescission creates the delegation to return the things which were the
object of the contracts, together with their fruits & the price with its interest
Article 1386. Rescission referred to in NO.1 and 2 of Article 1381 Shall not take
place with respects to contracts approved by the courts.
Article 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.
- Statutory presumptions of fraud in Art. 1887
- Alienation by gratuitous title
- Alienation by onerous title
Article 1388. who ever acquires in bad forth 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
Article 1389. The action to claim rescission must be commenced within 4 years.
VOIDABLE CONTRACT ~ con ratify, valid until annulled.
Article 1390.
What contracts are voidable
1. when one of the parties is incapable of giving consent (absolute incapacity).
2.when 1 or more of the vices consent is present
Vices Consent (FUMIV)
*Violence
*Intimidation
*Mistake
*Fraud
*Undue Influence
Arfele 1391. The action for annulment shall be brought within years.
This period shall begin in case of Intimidation Violence or undue influence from the time
the defect of the consent ceases.
Article 1392. Ratification extinguishes the action to annul a voidable contract
Article 1393. Ratification may be effected expressly or tacit, It is understood that
there is a tacit Ratification of with knowledge of the reason which renders the
contract voidable and such reason which renders the contract voidable and such
reason having ceased, the person who has right to involve it should execute an
act which necessarily implies an intention to waive his right
Article 1394. Ratification may be affected by the guardian of the incapacitated
person
Article 1395. Ratification does not require the conformity of the contracting party
who has no right to bring the action for annulment.
Article 1396. Ratification cleanses the contract from all its defects from the
moment it was constructed.
Article 1397. The action for the annulment of contracts may be instituted by all
who are thereby obliged principally or subsidiarity.
Article 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 case provided
by low, in obligations to render service the value thereof shall be the basis for
damages
Article 1399. When the defect of the contract consists in the incapacity of one of
the parties, the incapacitated person is not obliged to do any restitution except in
so far as he has been benefited by the thing or price received by him.
Article 1400. whenever the person is 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
1. the fruits received
2. the value of the thing at the time of the loss
3. and with interest from the same date
Article 1401. The action for annulment of contracts shall be extinguished when
the thing which is the object thereof is lost Through the fraud of fault of the
person who has a right to institute the proceedings.
Article 1402. As long as of the contracting parties does not restore what in virtue
of the decree of annulment he is bound tore turn, the other cannot be compelled
to comply with what is incumbent upon him
UNENFORCEABLE CONTRACTS
Article 1403. Embodying the essential of the contract and signed by the
party.charged or his agent, suffices to make the verbal agreement enforceable,
taking out of the operation of the statute.
Article 1404. Unauthorized contracts are governed by article 1317 & the principles
of agency in title x of this book.
Article 1405. Contracts infringing the statute of frauds, referred to in No.2 Article
1403, are ratified by the failure to deject to the presentation of oral evidence to
prove the same V or by the acceptance of benefits.
Article 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 1387.
Article 1407. In a contract where both parties ons incapable of giving consent,
express or implied ratification by the parent or guardian.
Article 1408. Unenforceable contents cannot be assailed by third persons. Right
of 3rd persons to assail unenforceable contracts.
VOID -are inexist, it can be ratified
-produces no effect at all
-no action is required to set aside
Article 1409. The ff. contracts are inexistent and void from the beginning
1. Those whose cause, object or purpose is contrary to low morals, good
customs, public order or public policy.
2. Those which are obdurately simulated or fictitious.
Article 3411, when the nullity proceeds from the illegality of the cause or object of
the contract, and the act constitutes criminal offense, both parties being in pari
delicto, they shall have no action against each other, and both shall be
prosecuted.
Article 1412. if the act in which the unlawful or forbidden cause consists does not
constitute a criminal offense.
Article 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
caused to a third person.
Article 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,
Article 1416. When the agreement is not illegal per se but is merely prohibited,
and the prohibition by the law is designed for the protection of the plaintiff, it
may, if public policy is thereby enhanced, recover what he has paid or delivered.
Article 1417. when the price of any article or commodity is determined by statute,
or by authority of Law, any person paving any amount in excess of the maximum
price allowed may recover such excess.
Article 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.
Article 1419. when the low sets, or authorizes the settings 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.
Article 1420. In case of divisible contract, if the illegal terms can be separated
from the legal ones the latter may be enforced.
Article 1421. The defense of illegality of contracts is not available to third persons
whose interest are not directly affected
Article 1422. A contract which is the direct result of a previous illegal Contract is
also void and inexistent..