Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Untitled Prezi

No description
by

Lara Palo

on 24 March 2014

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Untitled Prezi

THE LAW ON OBLIGATIONS AND CONTRACTS
Article 1395
Ratification does not require the conformity of the contracting party who has no right to bring the action for annulment.
Ratification is a unilateral act by which a party waives the defect of his consent.
ART. 1396.
Ratification cleanses the contract from all its defects from the moment it was constituted.
Effect of ratification: *RETROACTIVE.
Ratification makes the contract valid from its inception subject to the prior rights of third persons.

Example:
B forced S to sell the latter’s horse. Later, the horse gave birth to a colt. If S should ratify the contract after the birth of the colt, who is entitled to the colt?
S is entitled to the colt.
If the horse is sold by B to C who acted in good faith, the subsequent ratification by S of the sale to B cannot prejudice C.


*ret-ro-ac-tive (adj): (especially of legislation) taking effect from a date in the past
ART. 1397.
The action for the annulment of contracts may be instituted by all who are thereby obliged principally or subsidiarily. However, persons who are capable cannot allege the incapacity of those 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.
Party entitled to bring an action to annul.
The victim or injured party in a voidable contract can ask for annulment.
Requisites to confer necessary capacity to bring an action for annulment of a contract:
+ The plaintiff must have an interest in the contract.
+ The victim is the person who must assert the same.

Example: ART. 1397
S sold a piece of urban land to B. On grounds provided by law, S or B can bring an action to annul the contract.

But C, an adjoining owner of , cannot ask for the annulment of the sale as C is not obliged principally nor subsidiarily under the contract.

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 cases provided by law.

GENERAL:
Parties shall return to each other the object of the contract, that is if the contract was already executed.

SPECIFIC:
Parties don’t need to return the object in cases provided by law.

*
If the voidable contract is not yet executed, the parties are not bound to comply with their agreement.

ARTICLE 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)
In obligations to render service, the value thereof shall be the basis for damages. (1303a)
GENERAL:
If the reason behind the annulment of a voidable contract is because of the INCAPACITY of one of the parties, then he doesn’t need to return the object he received.
SPECIFIC:
The incapacitated party needs to return the object which he benefited.

*The guilty party is liable to answer for damages.

Restitution
- (n) the act of returning something that was lost or stolen to its owner


EXAMPLE: ART.1398-1399

A broke up with X. Because of heartbreak, he drowned himself to alcohol and soon completely lost his understanding. While in this state, B asked X if he (X) wants to sell his dog. X immediately said yes and sold his pregnant dog to B for P20,000. After two days, the dog gave birth to seven puppies. And after a week, X filed an annulment and the court annulled the contract.

-X needs to return the P20,000 plus interest and B must return the dog with his seven puppies.

If after receiving the P20,000, X used P5,000 to pay for his drinks and the remaining P15,000 was lost due to his unconsciousness. Then, X is only allowed to return P5,000.

EXAMPLE: ART. 1398-1399

A sold his 3,000 square meters of land with sugarcane to B for P300,000. But, it turned out that the land was only 2,000 square meters without the knowledge of A at the time of sale. A already used P285,000 to buy his own car while P15,000 was lost due to his carelessness.

- A is obliged to return the full amount of P300,000 to B. Because the annulment of the voidable contract was due to the substantial error/mistake in the object of the contract, not because of incapacity.

Article 1400.
Whenever the person obliged by the decree of annulment to return the thing cannot 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.
Effects of loss of thing to be returned

If the loss to be returned is lost without the fault of the person obliged to make restitution (defendant), there is no more obligation to return such thing. But in such a case, the other cannot be compelled to restore what in virtue of the decree of annulment he is bound to return
If it lost through his fault, his obligation is not extinguished but is converted into an indemnity for damages consisting of the value of the thing at the time of the loss with interest from the same date and the fruits received from the time the thing was given to him to the time of its loss.

EXAMPLE: ART. 1400

B forced S to sell to him a specific carabao. On the petition of S, the contract was annulled by the court. The carabao died in the possession of B through his fault.

If loss is due to the fault of B:
- Value of the carabao at the time of its death with interest from the same date
- Fruits of the carabao (if it gave birth to a young)
If loss is due to a fortuitious event:
-Value at the time of loss
-Fruits received

Article 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.

- If due to his fault the right to annul is extinguished.

- If due to a fortuitous event, the contract can still be annulled unless the innocent party could no longer restore what, by virtue by the decree of annulment is bound to return.

LOSS NOT THROUGH THE FAULT OF THE PERSON WHO HAS THE RIGHT TO FILE THE ACTION

- action for annulment is not extinguished by any event not due to the fault or fraud of the plaintiff.

Right to action for annulment is not extinguished because extinguishment limited only to the loss due to the fault of the plaintiff.
There will be unjust enrichment if the defendant still returns what he is obliged to return. Hence, the defendant cannot be obliged to make restitution to the plaintiff because of Art. 1402.

S forced B to sign a contract of sale of a specific house for P 1000000. B got the house and destroyed it.

Can B still file an action for annulment?

B can no longer file for an action for annulment because by his act of destroying the house, he loses his right to file the action for annulment.

S sold a specific house to B, a minor, for P 1000000. Later, the house was destroyed by fortuitous event.

Can B still file an action for annulment?

Yes, if the right of action is based upon the incapacity of anyone of the contracting parties, the loss of thing shall not be an obstacle to the success of the action. Be it noted that the loss is due to a fortuitous event and the minor is not guilty of fraud or fault.

ARTICLE 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.

Effect where a party cannot restore what he is bound to return.

When a contract is annulled, a reciprocal (complementary) obligation of restitution (restoration) is created. The return by one party of what he is obliged to restore by the decree of annulment may be regarded as a condition to the fulfillment by the other of what is incumbent upon him.
In effect, there will be no annulment if the party cannot restore what he is bound to return. This is true even if the loss is due to a fortuitous event.

EXAMPLE: ARTICLE 1402.

Juan forced Pedro to sell his (Pedro’s) horse. The contract was annulled by the court at the instance of Pedro.

If the horse died through the fault of Juan, Article 1400 governs.
If the horse died due to fortuitous event, Pedro can refuse to return the purchase price.

With, or without the fault of Juan, Pedro, (as injured party) has the right to demand the value of the horse with damages.

UNENFORCEABLE CONTRACTS



ART. 1403.
The following contracts are unenforceable, unless they are ratified

(1) Those entered into the name of another person by one who has been given no authority or legal representation, or who has acted beyond his power;

(2) Those that do not comply with the Statute of Frauds;

(3) Those where both parties are incapable of giving consent to the contract.

(1)

Unenforceable contracts

are those that cannot be
enforced in court or sued upon by reason of defects
provided by law, until and unless they are ratified
according to law.
Sometimes these are called validable contracts.
Voidable and rescissible are valid and binding until
annulled or rescinded.
(1) Contracts entered into in the name of another person who has been given no authority or legal representation or who has acted beyond his power are unenforceable unless ratified.
Example: ART 1403.

O is the owner of a specific car. X sold the car to B without authority from O. In this case, B cannot demand delivery from O because the contract is unenforceable. However if B gave X the purchase price and X gave it to O who accepted it, the contract becomes enforceable because there was ratification.
(2) Statute of Frauds
it is a law which requires that certain contracts must be in writing, otherwise, unenforceable.
The following agreements 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 chattels at a price not less than P500.00
(e) An agreement for the leasing for longer period than 1 year, or for the sale of real property or of an interest therein.
(f) A representation as to the credit of a third person.
(2a) EXAMPLE:

On January 1, 2010, C and D orally entered into a contract for the construction of C's building which shall begin on February 1, 2011. Neither one may enforce the contract against the other on February 1, 2011 as it was not in writing and subscribed by either or both parties.

(2b) EXAMPLE:

D borrowed from C P10000.00 with G as guarantor. The guaranty was made orally. If D cannot pay, C cannot enforce the guaranty against G.
(2c) EXAMPLE:

F, the father of Vince, orally agreed to give a house and lot to Vince, the groom, and Arianne, his bride, in consideration of their marriage. The agreement is unenforceable against F since this is not in writing.

(2c) EXAMPLE:
Vince and Arianne mutually agreed to marry each other within 6 months. The agreement was oral. At then end of 6 months, Vince refused to marry Arianne. If preparations have been made for the wedding, Vince can enforce the contract for the purpose of claiming damages, although the mutual promise was not in writing, but not for the specific promise to marry.
(e) An agreement for the leasing of a real property or of an interes therein for more than 1 year.

(f) Sale of real property or an interest therein (regardless of price).

(g) The representation must have the effect of inducing the party to whom the representation is made to grant credit to another.
(2) Statute of Frauds applies only to executory contracts. They are susceptible of ratification which will render them enforceable through:
- failure to object to the representation of oral evidence to prove them
- acceptance of benefits under them
(3) Effect of ratification parent or guardian

(a) When only the parent or guardian of one party ratifies, the contract is voidable a the instance of the parent or guardian of the party who did not ratify the contract.
(b) When the parents or guardians of both parties ratify, the contract shall be considered validated from inception.
ARTICLE 1404.
Unauthorized contracts are governed by Article 1317 of this topic and the principles of agency in Title X of this Book


Unauthorized contracts are unenforceable but can be cured by ratification of the person in whose name the contract was entered into or by his duly authorized representative and not by any other person not so empowered. The ratification must be clear and express so as not to admit any doubt or vagueness.

Example:

Anna borrowed P20,000.00 from Brian wherein she executed a promissory note. In the note it is stated that Anna is acting in favor of Carlo and that the money was intended for him. Carlo did not authorize Anna to borrow from Brian.
In this case the contract of Anna is not enforceable against Carlo. However, Carlo can approve or sanction the contract unless it was already revoked by Brian. Ratification cleanses the contract from all its defects from the moment the contract was entered into.

Contracts infringing the Statute of Frauds, referred to in No. 2, article 1403, are ratified by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of benefits under them.

Article 1405

- Failure to object to the presentation of oral evidence to prove the contract
The failure to object amounts to a waiver and makes the contract as binding as if it has been reduced to writing.

- Acceptance of benefits under the contract
This rule is based upon the principle that one who has enjoyed the benefits of a transaction should not be allowed to disown its burdens.


Example:

Anna verbally leased her house for P10,000.00 pesos for two years to Brian. After 1 year she has decided to raise the rental to P15,00.00 pesos. Brian refused to pay the new amount because the house was supposed to be leased at the same price for 2 years. Anna asked Brian to vacate the house but Brian refused. Brian can claim ratification of contract because Anna has enjoyed the benefits of the contract even if there was no written agreement.

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 1357

The following requirements should be present:
- The contract must be valid.
- The contract is enforceable.

Example:

Anna sold to Brian her farm in a private instrument for 2M pesos. Brian has paid it in cash. Later, Brian wanted to have the sale registered which requires execution of a public instrument.
The contract is valid and enforceable . Brian has the right to request Anna to execute the public instrument for the registration.

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.

When unenforceable contract becomes voidable contract
-if the parent or guardian, as the case may be, of either party, or if one of the parties after attaining or regaining capacity, ratifies the contract, it becomes voidable

When unenforceable contract becomes a valid contract
- if the ratification is made by the parents or guardians, as the case may be, of both contracting parties, or by both contracting parties after attaining or regaining capacity, the contract is validated and its validity retroacts to the time it was entered into.

EXAMPLE:

S, 16 years old, and B, 17 years old, entered into a contract of sale of a cell phone without the consent of their parents. The contract is unenforceable because both parties are incapacitated.

If later the parent of S ratifies the contract, the same becomes voidable, because there is only one party incapacitated.

If later on, the parent of B also ratifies the contract, it becomes enforceable upon its inception.

ART. 1408.
Unenforceable contracts cannot be assailed by third persons.

Right of 3rd persons to assail an unenforceable contract.
- strangers to a voidable contract cannot bring an action to annul the same; neither can they assail or question a contract because of its unenforceability. The benefit of the statue can only be claimed or waived by one who is a party or privy to the oral contract, not by a stranger. It is a personal defense.

EXAMPLE:

S sells a parcel of land to B. The contract is oral. C binds himself in writing for the performance by B of his obligation to pay the purchase price.

In action by S to recover the purchase price, C cannot assail the contract between S and B for being unenforceable under the statute of frauds. C is a stranger to the contract.

Under the verbal contract, S sells a parcel of land to B. in an action of ejectment by B against C, the person in possession, the latter cannot set up the defense of the statute of Frauds.

Suppose, C maliciously induces S to sell the land to B so that S sells the land to another. In an action by B against C for damages the latter cannot also invoke the statute of Frauds

Article 1409.
The following contracts are inexistent and void from the beginning:

Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy. (art. 1352)
Those which are absolutely simulated or fictitious; (art. 1346)
Those whose cause or object did not exist at the time of the transaction;
Those whose object is outside the commerce of men; (art. 1347)
Those which contemplate an impossible service; (art. 1348)
Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (art. 1349)
Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived.




Article 1410.
The action or defense for the declaration of the inexistence of a contract does not prescribe.

VOID CONTRACTS
- contracts which have absolutely no force and effect and are inexistent from the beginning. The maxim is “NO CONTRACTS AT ALL”

Kinds of Void Contracts
THE INEXISTENT ONES
-– the formalities required by law were not met. The contract has no effect at all.
Example: Donation of land in private instrument
 
THE ILLEGAL OR ILLICIT ONES
- Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy.
Example: Donation made with immoral condition, such as sexual intercourse , contract to sell marijuana



Characteristics of Void Contracts

Defense of illegality cannot be waived.
They are not subject to ratification.
The action to declare the contract inexistent does not prescribe.
Generally, no action to declare them void is needed.
The defense of illegality of contract is not available to third persons whose interest are not directly affected.

Void and Inexistent contracts
Void or inexistent contract produces as a rule, NO EFFECT, even if it is not set aside by a direct action
The defect onsist in absolute lack of fact or in law of one or some or all of the essential elements of a contract
The action for the declaration of nullity or inexistence of a contract is imprescriptible
The nullity or inexistence of a contract cannot, as a rule, be assailed by third persons whose interests are not directly affected.

Defective/rescissible contracts
Recsissible contact is valid until rescinded.
The defect consist in damage to one of the contracting parties or of the third person.
The action for the rescission is prescriptible.
The rescissible character of a contract may be assailed by third persons.

Void Contracts
Void or inexistent contract produces as a rule, NO EFFECT, even if it is not set aside by a direct action not susceptible of ratification
The action for the declaration of nullity or inexistence of a contract is imprescriptible
The defense of inexistence or absolute nullity is available to third persons whose
Voidable Contracts
voidable contract is binding unless it is annulled.
susceptible of ratification
the action for the annulment of the contract is prescriptible
the defense of the anullability is not available to third persons.

Void Contacts
In a void or inexistent contracts, there is in law or in reality, no contracts at all
not susceptible of ratification
can be assailed by third persons whose interests are directly affected

Unenforceable Contracts
in an unenforceable contract, there is actually a contract which cannot be enforced by a court action unless it is ratified.
susceptible of ratification.
cannot be assailed by third persons.

Article 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.

Those where both parties are guilty (pari delicto)

Example: Sale of marijuana.

Effects: a. No right of action against each other
b. Both will be prosecuted.
c. Effects or instrument of the crime will be confiscated in favor of the government.

Only one party Is guilty.

Example: S sold a government property to B who is in good faith.
Effects: a. The guilty party will be prosecuted.
b. Property sold will be confiscated in favor of the government.
c. Innocent party can claim what he has given.

Article 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)

Where both parties are in pari delicto
Effects:
a. Neither party may recover what he has given by virtue of the contract.
b. Neither party may demand the performance of the other’s undertaking.


Example:
R agreed to live as a common-law wife of V in consideration of the promise on the part of V to donate a land to R. Here, the promise of V has for its consideration an immoral act which does not constitute a crime.

Where only one party is guilty.
Effects:
a. The guilty party loses what he has given by reason of the contract.
b. The guilty party cannot ask for the fulfillment of the other’s undertaking.
c. The innocent party may demand the return of what he has given.
d. The innocent party cannot be compelled to comply with his promise.

Example:
If R was only a minor and V was a married man of mature years, the principle of in pari delicto is not applicable. V cannot recover the land given by him nor demand the performance of R’s undertaking if the latter has not yet complied with her promise. However, R may recover whatever property she may have given by virtue of the contract without any obligation to comply with her promise.

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.

Any rate of interest in excess of the maximum allowed under the Usury Law may be recovered together with interest thereon from the date of payment.

State laws set the maximum amount of interest that can be charged for a loan of money. Courts may modify contracts that contain usurious rates of interest by reducing the interest to the legal maximum.


Vocabulary:
Usury- the practice of lending money and requiring the borrower to pay a high amount of interest

Usury Law-laws which limit the amount of interest which can be charged on loans
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.

- one of the parties may refuse to accept money paid or property when it is delivered for illegal purposes before the purpose has been accomplished, or before any damage has been caused.

Example:
Hugo Layer paid 100,000 pesos to Cleto but he has to hide his son Diego Layer to the police because he was wanted and charged a criminal. Cleto changed his mind and decided not to do it.

Vocabulary:
Repudiated- Refusal to accept
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.
EXAMPLE:
If Hugo Layer is an insane person, the court may allow Hugo to recover the money paid if the interest of justice so demands.
ART. 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, he may, if public policy is thereby enhanced, recover what he has paid or delivered
Contracts illegal per se

-those forbidden contracts because of public interest
“Merely” prohibited contracts

a. If the contract is not illegal per se.
b. The prohibition is for the protection of the plaintiff.
c. Public policy will be enhanced by allowing the recovery.
EXAMPLE:

F, a Filipino, sold and delivered to K, a Korean alien , a parcel of land for P100000. Although both parties are at fault, the land delivered to K may be recovered.
A land sold in violation of the constitutional prohibition against the transfer of lands to aliens may be recovered.

ARTICLE 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.


Ceiling Law
- a statute fixing the maximum price of any article or commodity

EXAMPLE:
Suppose by Executive Order of the President, the price per kilo of rice of a particular brand and quality has been fixed at P30. If a person pays P35.00 for it, he can recover the excess of P5.00.


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.

Labor Code (Presidential Decree No. 442)

- sets forth that the normal hours of work of any employee shall not exceed 8 hours a day.
- the law applies to employees in all establishments and undertakings, whether for profit or not, but not to:
1. Government employees
2. Managerial employees
3. Field personnel
4. Members of the family of the employers who are dependent upon him for support
5. Domestic helpers
6. Persons in the personal service of another
. Workers who are paid by resultsGenerally, the maximum number of hours of work is 8 hours a day. The minimum wage of an employee a day is P336.00.
ARTICLE 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.

Labor Code of the Philippines

“No worker or organization of workers may voluntarily or otherwise, individually or collectively, waive any rights established under this act, and no agreement or contract, oral or written, to accept a lower wage or less than any other benefit required under this act shall be valid.”
ARTICLE 1420.
In case of a divisible contract, if the illegal terms can be separated from the legal ones, the latter may be enforced.

Illegal terms of the contract
If indivisible, the whole contract is void, even if only some parts or terms are illegal.


Example:
S sold to B his car and shabu, a prohibited drug, for P200000.

If divisible, the legal terms may be enforced if they can be separated from the illegal terms.


Example:
D executed a promissory note in favor of C for money won by C in two games played on two occasions, monte, a prohibited game, and burro, which is not prohibited.
ARTICLE 1421.
The defense of illegality of contract is not available to third persons whose interests are not directly affected.

- third persons have no legal personality to interferer in any court proceeding.

Example.

Vince, husband, sold his parcel of land to Ar, his wife. Under the law, husband and wife cannot sell property to each other and such sale is, therefore, illegal and void.

If Top, a third person, became a creditor of Vince, before the transaction, he can question the sale for the reason that his right or interest is directly affected. However, if he became a creditor after the transfer, the defense of illegality is not available to him.

The purpose of the prohibition is to protect third persons who, relying upon supposed property of either spouse, enter into a contract with either of them only to find out that the property relied upon was transferred to the other spouse.

ARTICLE 1422.
A contract which is the direct result of a previous illegal contract, is also void and inexistent.

Void contract cannot be novated.

- an illegal contract is void and inexistent and cannot, therefore, give rise to a valid contract.

Example:
D promised to give K a specific car, if K kills X.

After the act was consummated, D and K novated the contract that instead of D giving K a car, he will just give K P300,000.

ARTICLE 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.

Civil Obligations
Arise from law, contracts, quasi-contracts, delicts, and quasi-delicts.
Give a right of action in courts of justice to compel their performance or fulfillment.

Natural Obligations
Based not on positive law, but on equity and natural law.
Do not grant such right of action to enforce their performance.

ARTICLE 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.


ARTICLE 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.

Example:

D owes C P10000.00. The debt soon prescribed. Later, X, a third person, pays C P10000.00. D here does not have to reimburse X because the debt had already prescribed when X paid C.
If subsequently, D reimburses X voluntarily, after the reimbursement, D cannot recover what he paid to X anymore.

ARTICLE 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 that he has not been benefited thereby, there is no right to demand the thing or price thus returned.

Example:

M, a minor 17 years old, sold for P100000.00 his car to B, without the consent of his parents.

He lost P30000.00 to a pick-pocket although he was able to deposit the P70000.00 to the bank.

If the contract is annulled, M is obliged to return only P70000.00. However, he has the natural obligation to return P100000.00. If he voluntarily returns the whole amount, there is no right to demand the same.

ARTICLE 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)
Although Article 1427 speaks of “fungible thing,” nevertheless, it may also apply to things that are non-consumable when they have been lost without fault of the obligee or in case of alienation by him to a third person who did not act in good faith. The obligee shall be liable for damages if he is guilty of fault or bad faith at the time of spending or consumption.

Example:

A sold a cell phone to B, a minor (A has no knowledge of B’s age), and B paid A in cash without the consent of any guardian.

If later B files for an annulment, and A has already spent the money in good faith, A will not be liable to return the money to B.

ARTICLE 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.
Example:

D owes C P10000.00, evidenced by a promissory note, due on June 10, 2012. On the date of maturity, D failed to pay. C files an action for collection, but the same was unsuccessful because the evidence of the obligation, which is the promissory note, got lost. No appeal was made and the judgment becomes final.

Later, D still paid C voluntarily. D cannot anymore demand the return of what he paid C.

ARTICLE 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.


Example:

D died leaving an estate of P700000.00 against his liability of P900000.00. S, his only heir, is not liable to make for the difference. But if he paid the difference of P200000.00 to C, he cannot later on recover what he paid under the natural obligations rule.

ARTICLE 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.


Legacy

- is the act of disposition by the testator in separating from the inheritance for definite purposes, things, rights or a definite portion of his property.
- the purpose of the legacy is to reward friends, servants, and others for services they have rendered.
If the will or last will and testament is void, the legacy would also be void, and the deceased is considered to have died intestate that is, without a will. The property, therefore, will be distributed according to law because he died intestate.

Example:

T, testator, executed a will giving a specific car to X, his friend, as legacy, and the remaining portion of his properties to T’s compulsory heirs. However, for non-compliance with the formalities prescribed by law, such will is not valid. Thus, T is considered to have died intestate.

Therefore, all property, including the specific car must be given to his legal heirs. If later on, the legal heirs voluntarily delivered the legacy (car) to X, they cannot recover anymore what they have given.

EXAMPLE: ART. 1401
EXAMPLE: ART. 1401
EXAMPLE:

D wants to buy construction materials on credit form C. T orally tells C that D has a good credit standing and pays his loans promptly. C thus sells on credit to D. If the representation is false, C cannot prove such misrepresentation against T to recover damages because it is not enforceable not being in writing.
EXAMPLE:

S orally sold to B a radio for P800.00. The parties agreed that S would deliver the radio the following day. B however gave a down payment of P200.00. The sale is enforceable because S has accepted the benefit under the contract.
Full transcript