BOOK IV

Obligations and Contracts Article 1160. Obligations derived from quasi-contracts

shall be subject to the provisions of Chapter 1, Title
XVII, of this Book. (n)
TITLE I
Obligations Article 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
CHAPTER 1 provisions of Chapter 2, Preliminary Title, on Human
General Provisions Relations, and of Title XVIII of this Book, regulating
damages. (1092a)
Article 1156. An obligation is a juridical necessity to
give, to do or not to do. (n) Article 1162. Obligations derived from quasi-delicts shall
be governed by the provisions of Chapter 2, Title XVII
Article 1157. Obligations arise from: of this Book, and by special laws. (1093a)

(1) Law;
CHAPTER 2
(2) Contracts;
Nature and Effect of Obligations
(3) Quasi-contracts;
Article 1163. Every person obliged to give something is
(4) Acts or omissions punished by law; and also obliged to take care of it with the proper diligence
of a good father of a family, unless the law or the
(5) Quasi-delicts. (1089a) stipulation of the parties requires another standard of
care. (1094a)
Article 1158. Obligations derived from law are not
presumed. Only those expressly determined in this Article 1164. The creditor has a right to the fruits of the
Code or in special laws are demandable, and shall be thing from the time the obligation to deliver it arises.
regulated by the precepts of the law which establishes However, he shall acquire no real right over it until the
them; and as to what has not been foreseen, by the same has been delivered to him. (1095)
provisions of this Book. (1090)
Article 1165. When what is to be delivered is a
Article 1159. Obligations arising from contracts have the determinate thing, the creditor, in addition to the right
force of law between the contracting parties and should granted him by article 1170, may compel the debtor to
be complied with in good faith. (1091a) make the delivery.
 (1) When the obligation or the law expressly so declare;
If the thing is indeterminate or generic, he may ask that or
the obligation be complied with at the expense of the
debtor. (2) When from the nature and the circumstances of the
obligation it appears that the designation of the time
If the obligor delays, or has promised to deliver the when the thing is to be delivered or the service is to be
same thing to two or more persons who do not have the rendered was a controlling motive for the establishment
same interest, he shall be responsible for any fortuitous of the contract; or
event until he has effected the delivery. (1096)
(3) When demand would be useless, as when the
Article 1166. The obligation to give a determinate thing obligor has rendered it beyond his power to perform.
includes that of delivering all its accessions and
accessories, even though they may not have been In reciprocal obligations, neither party incurs in delay if
mentioned. (1097a) the other does not comply or is not ready to comply in a
proper manner with what is incumbent upon him. From
Article 1167. If a person obliged to do something fails to the moment one of the parties fulfills his obligation,
do it, the same shall be executed at his cost. delay by the other begins. (1100a)

This same rule shall be observed if he does it in Article 1170. Those who in the performance of their
contravention of the tenor of the obligation. obligations are guilty of fraud, negligence, or delay, and
Furthermore, it may be decreed that what has been those who in any manner contravene the tenor thereof,
poorly done be undone. (1098) are liable for damages. (1101)

Article 1168. When the obligation consists in not doing, Article 1171. Responsibility arising from fraud is
and the obligor does what has been forbidden him, it demandable in all obligations. Any waiver of an action
shall also be undone at his expense. (1099a) for future fraud is void. (1102a)

Article 1169. Those obliged to deliver or to do Article 1172. Responsibility arising from negligence in
something incur in delay from the time the obligee the performance of every kind of obligation is also
judicially or extrajudicially demands from them the demandable, but such liability may be regulated by the
fulfillment of their obligation. courts, according to the circumstances. (1103)

However, the demand by the creditor shall not be Article 1173. The fault or negligence of the obligor
necessary in order that delay may exist: 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, Article 1178. Subject to the laws, all rights acquired in
paragraph 2, shall apply. virtue of an obligation are transmissible, if there has
been no stipulation to the contrary. (1112)
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. CHAPTER 3
(1104a) Different Kinds of Obligations

Article 1174. Except in cases expressly specified by the

law, or when it is otherwise declared by stipulation, or SECTION 1
when the nature of the obligation requires the Pure and Conditional Obligations
assumption of risk, no person shall be responsible for
those events which could not be foreseen, or which, Article 1179. Every obligation whose performance does
though foreseen, were inevitable. (1105a) not depend upon a future or uncertain event, or upon a
past event unknown to the parties, is demandable at
Article 1175. Usurious transactions shall be governed by once.
special laws. (n)
Every obligation which contains a resolutory condition
Article 1176. The receipt of the principal by the creditor shall also be demandable, without prejudice to the
without reservation with respect to the interest, shall effects of the happening of the event. (1113)
give rise to the presumption that said interest has been
paid. Article 1180. When the debtor binds himself to pay
when his means permit him to do so, the obligation
The receipt of a later installment of a debt without shall be deemed to be one with a period, subject to the
reservation as to prior installments, shall likewise raise provisions of article 1197. (n)
the presumption that such installments have been paid.
(1110a) Article 1181. In conditional obligations, the acquisition
of rights, as well as the extinguishment or loss of those
Article 1177. The creditors, after having pursued the already acquired, shall depend upon the happening of
property in possession of the debtor to satisfy their the event which constitutes the condition. (1114)
claims, may exercise all the rights and bring all the
actions of the latter for the same purpose, save those Article 1182. When the fulfillment of the condition
which are inherent in his person; they may also impugn depends upon the sole will of the debtor, the conditional
the acts which the debtor may have done to defraud obligation shall be void. If it depends upon chance or
them. (1111) upon the will of a third person, the obligation shall take
effect in conformity with the provisions of this Code. Nevertheless, when the obligation imposes reciprocal
(1115) prestations upon the parties, the fruits and interests
during the pendency of the condition shall be deemed to
Article 1183. Impossible conditions, those contrary to have been mutually compensated. If the obligation is
good customs or public policy and those prohibited by unilateral, the debtor shall appropriate the fruits and
law shall annul the obligation which depends upon interests received, unless from the nature and
them. If the obligation is divisible, that part thereof circumstances of the obligation it should be inferred
which is not affected by the impossible or unlawful that the intention of the person constituting the same
condition shall be valid. was different.

The condition not to do an impossible thing shall be In obligations to do and not to do, the courts shall
considered as not having been agreed upon. (1116a) determine, in each case, the retroactive effect of the
condition that has been complied with. (1120)
Article 1184. The condition that some event happen at a
determinate time shall extinguish the obligation as soon Article 1188. The creditor may, before the fulfillment of
as the time expires or if it has become indubitable that the condition, bring the appropriate actions for the
the event will not take place. (1117) preservation of his right.

Article 1185. The condition that some event will not The debtor may recover what during the same time he
happen at a determinate time shall render the has paid by mistake in case of a suspensive condition.
obligation effective from the moment the time indicated (1121a)
has elapsed, or if it has become evident that the event
cannot occur. Article 1189. When the conditions have been imposed
with the intention of suspending the efficacy of an
If no time has been fixed, the condition shall be deemed obligation to give, the following rules shall be observed
fulfilled at such time as may have probably been in case of the improvement, loss or deterioration of the
contemplated, bearing in mind the nature of the thing during the pendency of the condition:
obligation. (1118)
(1) If the thing is lost without the fault of the debtor,
Article 1186. The condition shall be deemed fulfilled the obligation shall be extinguished;
when the obligor voluntarily prevents its fulfillment.
(1119) (2) If the thing is lost through the fault of the debtor, he
shall be obliged to pay damages; it is understood that
Article 1187. The effects of a conditional obligation to the thing is lost when it perishes, or goes out of
give, once the condition has been fulfilled, shall retroact commerce, or disappears in such a way that its
to the day of the constitution of the obligation. existence is unknown or it cannot be recovered;
 The injured party may choose between the fulfillment
(3) When the thing deteriorates without the fault of the and the rescission of the obligation, with the payment of
debtor, the impairment is to be borne by the creditor; damages in either case. He may also seek rescission,
even after he has chosen fulfillment, if the latter should
(4) If it deteriorates through the fault of the debtor, the become impossible.
creditor may choose between the rescission of the
obligation and its fulfillment, with indemnity for The court shall decree the rescission claimed, unless
damages in either case; there be just cause authorizing the fixing of a period.

(5) If the thing is improved by its nature, or by time, This is understood to be without prejudice to the rights
the improvement shall inure to the benefit of the of third persons who have acquired the thing, in
creditor; 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 right than that granted to the Article 1192. In case both parties have committed a
usufructuary. (1122) breach of the obligation, the liability of the first infractor
shall be equitably tempered by the courts. If it cannot
Article 1190. When the conditions have for their be determined which of the parties first violated the
purpose the extinguishment of an obligation to give, the contract, the same shall be deemed extinguished, and
parties, upon the fulfillment of said conditions, shall each shall bear his own damages. (n)
return to each other what they have received.

In case of the loss, deterioration or improvement of the SECTION 2

thing, the provisions which, with respect to the debtor, Obligations with a Period
are laid down in the preceding article shall be applied to
the party who is bound to return. Article 1193. Obligations for whose fulfillment a day
certain has been fixed, shall be demandable only when
As for the obligations to do and not to do, the provisions that day comes.
of the second paragraph of article 1187 shall be
observed as regards the effect of the extinguishment of Obligations with a resolutory period take effect at once,
the obligation. (1123) but terminate upon arrival of the day certain.

Article 1191. The power to rescind obligations is implied A day certain is understood to be that which must
in reciprocal ones, in case one of the obligors should not necessarily come, although it may not be known when.
comply with what is incumbent upon him.
If the uncertainty consists in whether the day will come
or not, the obligation is conditional, and it shall be (1) When after the obligation has been contracted, he
regulated by the rules of the preceding Section. (1125a) becomes insolvent, unless he gives a guaranty or
security for the debt;
Article 1194. In case of loss, deterioration or
improvement of the thing before the arrival of the day (2) When he does not furnish to the creditor the
certain, the rules in article 1189 shall be observed. (n) guaranties or securities which he has promised;

Article 1195. Anything paid or delivered before the (3) When by his own acts he has impaired said
arrival of the period, the obligor being unaware of the guaranties or securities after their establishment, and
period or believing that the obligation has become due when through a fortuitous event they disappear, unless
and demandable, may be recovered, with the fruits and he immediately gives new ones equally satisfactory;
interests. (1126a)
(4) When the debtor violates any undertaking, in
Article 1196. Whenever in an obligation a period is consideration of which the creditor agreed to the
designated, it is presumed to have been established for period;
the benefit of both the creditor and the debtor, unless
from the tenor of the same or other circumstances it (5) When the debtor attempts to abscond. (1129a)
should appear that the period has been established in
favor of one or of the other. (1127)
SECTION 3
Article 1197. If the obligation does not fix a period, but Alternative Obligations
from its nature and the circumstances it can be inferred
that a period was intended, the courts may fix the ARTICLE 1199. A person alternatively bound by
duration thereof. 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 Article 1200. The right of choice belongs to the debtor,
contemplated by the parties. Once fixed by the courts, unless it has been expressly granted to the creditor.
the period cannot be changed by them. (1128a)
The debtor shall have no right to choose those
Article 1198. The debtor shall lose every right to make prestations which are impossible, unlawful or which
use of the period: could not have been the object of the obligation. (1132)
 which the creditor should choose from among the
Article 1201. The choice shall produce no effect except remainder, or that which remains if only one subsists;
from the time it has been communicated. (1133)
(2) If the loss of one of the things occurs through the
Article 1202. The debtor shall lose the right of choice fault of the debtor, the creditor may claim any of those
when among the prestations whereby he is alternatively subsisting, or the price of that which, through the fault
bound, only one is practicable. (1134) of the former, has disappeared, with a right to
damages;
Article 1203. If through the creditor's acts the debtor
cannot make a choice according to the terms of the (3) If all the things are lost through the fault of the
obligation, the latter may rescind the contract with debtor, the choice by the creditor shall fall upon the
damages. (n) price of any one of them, also with indemnity for
damages.
Article 1204. The creditor shall have a right to
indemnity for damages when, through the fault of the The same rules shall be applied to obligations to do or
debtor, all the things which are alternatively the object not to do in case one, some or all of the prestations
of the obligation have been lost, or the compliance of should become impossible. (1136a)
the obligation has become impossible.
Article 1206. When only one prestation has been agreed
The indemnity shall be fixed taking as a basis the value upon, but the obligor may render another in
of the last thing which disappeared, or that of the substitution, the obligation is called facultative.
service which last became impossible.
The loss or deterioration of the thing intended as a
Damages other than the value of the last thing or substitute, through the negligence of the obligor, does
service may also be awarded. (1135a) not render him liable. But once the substitution has
been made, the obligor is liable for the loss of the
Article 1205. When the choice has been expressly given substitute on account of his delay, negligence or fraud.
to the creditor, the obligation shall cease to be (n)
alternative from the day when the selection has been
communicated to the debtor.
SECTION 4
Until then the responsibility of the debtor shall be Joint and Solidary Obligations
governed by the following rules:
Article 1207. The concurrence of two or more creditors
(1) If one of the things is lost through a fortuitous or of two or more debtors in one and the same
event, he shall perform the obligation by delivering that 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. Article 1214. The debtor may pay any one of the
There is a solidary liability only when the obligation solidary creditors; but if any demand, judicial or
expressly so states, or when the law or the nature of extrajudicial, has been made by one of them, payment
the obligation requires solidarity. (1137a) should be made to him. (1142a)

Article 1208. If from the law, or the nature or the Article 1215. Novation, compensation, confusion or
wording of the obligations to which the preceding article remission of the debt, made by any of the solidary
refers the contrary does not appear, the credit or debt creditors or with any of the solidary debtors, shall
shall be presumed to be divided into as many shares as extinguish the obligation, without prejudice to the
there are creditors or debtors, the credits or debts provisions of article 1219.
being considered distinct from one another, subject to
the Rules of Court governing the multiplicity of suits. The creditor who may have executed any of these acts,
(1138a) as well as he who collects the debt, shall be liable to the
others for the share in the obligation corresponding to
Article 1209. If the division is impossible, the right of them. (1143)
the creditors may be prejudiced only by their collective
acts, and the debt can be enforced only by proceeding Article 1216. The creditor may proceed against any one
against all the debtors. If one of the latter should be of the solidary debtors or some or all of them
insolvent, the others shall not be liable for his share. simultaneously. The demand made against one of them
(1139) shall not be an obstacle to those which may
subsequently be directed against the others, so long as
Article 1210. The indivisibility of an obligation does not the debt has not been fully collected. (1144a)
necessarily give rise to solidarity. Nor does solidarity of
itself imply indivisibility. (n) Article 1217. Payment made by one of the solidary
debtors extinguishes the obligation. If two or more
Article 1211. Solidarity may exist although the creditors solidary debtors offer to pay, the creditor may choose
and the debtors may not be bound in the same manner which offer to accept.
and by the same periods and conditions. (1140)
He who made the payment may claim from his co-
Article 1212. Each one of the solidary creditors may do debtors only the share which corresponds to each, with
whatever may be useful to the others, but not anything the interest for the payment already made. If the
which may be prejudicial to the latter. (1141a) payment is made before the debt is due, no interest for
the intervening period may be demanded.
Article 1213. A solidary creditor cannot assign his rights
without the consent of the others. (n)
When one of the solidary debtors cannot, because of his creditor, the provisions of the preceding paragraph shall
insolvency, reimburse his share to the debtor paying the apply. (1147a)
obligation, such share shall be borne by all his co-
debtors, in proportion to the debt of each. (1145a) Article 1222. A solidary debtor may, in actions filed by
the creditor, avail himself of all defenses which are
Article 1218. Payment by a solidary debtor shall not derived from the nature of the obligation and of those
entitle him to reimbursement from his co-debtors if which are personal to him, or pertain to his own share.
such payment is made after the obligation has With respect to those which personally belong to the
prescribed or become illegal. (n) others, he may avail himself thereof only as regards
that part of the debt for which the latter are
Article 1219. The remission made by the creditor of the responsible. (1148a)
share which affects one of the solidary debtors does not
release the latter from his responsibility towards the co-
debtors, in case the debt had been totally paid by SECTION 5
anyone of them before the remission was effected. Divisible and Indivisible Obligations
(1146a)
Article 1223. The divisibility or indivisibility of the things
Article 1220. The remission of the whole obligation, that are the object of obligations in which there is only
obtained by one of the solidary debtors, does not entitle one debtor and only one creditor does not alter or
him to reimbursement from his co-debtors. (n) modify the provisions of Chapter 2 of this Title. (1149)

Article 1221. If the thing has been lost or if the Article 1224. A joint indivisible obligation gives rise to
prestation has become impossible without the fault of indemnity for damages from the time anyone of the
the solidary debtors, the obligation shall be debtors does not comply with his undertaking. The
extinguished. debtors who may have been ready to fulfill their
promises shall not contribute to the indemnity beyond
If there was fault on the part of any one of them, all the corresponding portion of the price of the thing or of
shall be responsible to the creditor, for the price and the the value of the service in which the obligation consists.
payment of damages and interest, without prejudice to (1150)
their action against the guilty or negligent debtor.
Article 1225. For the purposes of the preceding articles,
If through a fortuitous event, the thing is lost or the obligations to give definite things and those which are
performance has become impossible after one of the not susceptible of partial performance shall be deemed
solidary debtors has incurred in delay through the to be indivisible.
judicial or extrajudicial demand upon him by the
When the obligation has for its object the execution of a clearly granted him. However, if after the creditor has
certain number of days of work, the accomplishment of decided to require the fulfillment of the obligation, the
work by metrical units, or analogous things which by performance thereof should become impossible without
their nature are susceptible of partial performance, it his fault, the penalty may be enforced. (1153a)
shall be divisible.
Article 1228. Proof of actual damages suffered by the
However, even though the object or service may be creditor is not necessary in order that the penalty may
physically divisible, an obligation is indivisible if so be demanded. (n)
provided by law or intended by the parties.
Article 1229. The judge shall equitably reduce the
In obligations not to do, divisibility or indivisibility shall penalty when the principal obligation has been partly or
be determined by the character of the prestation in irregularly complied with by the debtor. Even if there
each particular case. (1151a) has been no performance, the penalty may also be
reduced by the courts if it is iniquitous or
unconscionable. (1154a)
SECTION 6
Obligations with a Penal Clause Article 1230. The nullity of the penal clause does not
carry with it that of the principal obligation.
Article 1226. In obligations with a penal clause, the
penalty shall substitute the indemnity for damages and The nullity of the principal obligation carries with it that
the payment of interests in case of noncompliance, if of the penal clause. (1155)
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 CHAPTER 4
obligation. Extinguishment of Obligations

The penalty may be enforced only when it is

demandable in accordance with the provisions of this General Provisions
Code. (1152a)
Article 1231. Obligations are extinguished:
Article 1227. The debtor cannot exempt himself from
the performance of the obligation by paying the penalty, (1) By payment or performance;
save in the case where this right has been expressly
reserved for him. Neither can the creditor demand the (2) By the loss of the thing due;
fulfillment of the obligation and the satisfaction of the
penalty at the same time, unless this right has been (3) By the condonation or remission of the debt;
 Article 1236. The creditor is not bound to accept
(4) By the confusion or merger of the rights of creditor payment or performance by a third person who has no
and debtor; interest in the fulfillment of the obligation, unless there
is a stipulation to the contrary.
(5) By compensation;
Whoever pays for another may demand from the debtor
(6) By novation. what he has paid, except that if he paid without the
knowledge or against the will of the debtor, he can
Other causes of extinguishment of obligations, such as recover only insofar as the payment has been beneficial
annulment, rescission, fulfillment of a resolutory to the debtor. (1158a)
condition, and prescription, are governed elsewhere in
this Code. (1156a) Article 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
SECTION 1 rights, such as those arising from a mortgage, guaranty,
Payment or Performance or penalty. (1159a)

Article 1232. Payment means not only the delivery of Article 1238. Payment made by a third person who does
money but also the performance, in any other manner, not intend to be reimbursed by the debtor is deemed to
of an obligation. (n) be a donation, which requires the debtor's consent. But
the payment is in any case valid as to the creditor who
Article 1233. A debt shall not be understood to have has accepted it. (n)
been paid unless the thing or service in which the
obligation consists has been completely delivered or Article 1239. In obligations to give, payment made by
rendered, as the case may be. (1157) one who does not have the free disposal of the thing
due and capacity to alienate it shall not be valid,
Article 1234. If the obligation has been substantially without prejudice to the provisions of article 1427 under
performed in good faith, the obligor may recover as the Title on "Natural Obligations." (1160a)
though there had been a strict and complete fulfillment,
less damages suffered by the obligee. (n) Article 1240. Payment shall be made to the person in
whose favor the obligation has been constituted, or his
Article 1235. When the obligee accepts the successor in interest, or any person authorized to
performance, knowing its incompleteness or irregularity, receive it. (1162a)
and without expressing any protest or objection, the
obligation is deemed fully complied with. (n) Article 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 Article 1245. Dation in payment, whereby property is
beneficial to him. alienated to the creditor in satisfaction of a debt in
money, shall be governed by the law of sales. (n)
Payment made to a third person shall also be valid
insofar as it has redounded to the benefit of the Article 1246. When the obligation consists in the
creditor. Such benefit to the creditor need not be proved delivery of an indeterminate or generic thing, whose
in the following cases: quality and circumstances have not been stated, the
creditor cannot demand a thing of superior quality.
(1) If after the payment, the third person acquires the Neither can the debtor deliver a thing of inferior quality.
creditor's rights; The purpose of the obligation and other circumstances
shall be taken into consideration. (1167a)
(2) If the creditor ratifies the payment to the third
person; Article 1247. Unless it is otherwise stipulated, the
extrajudicial expenses required by the payment shall be
(3) If by the creditor's conduct, the debtor has been led for the account of the debtor. With regard to judicial
to believe that the third person had authority to receive costs, the Rules of Court shall govern. (1168a)
the payment. (1163a)
Article 1248. Unless there is an express stipulation to
Article 1242. Payment made in good faith to any person that effect, the creditor cannot be compelled partially to
in possession of the credit shall release the debtor. receive the prestations in which the obligation consists.
(1164) Neither may the debtor be required to make partial
payments.
Article 1243. Payment made to the creditor by the
debtor after the latter has been judicially ordered to However, when the debt is in part liquidated and in part
retain the debt shall not be valid. (1165) unliquidated, the creditor may demand and the debtor
may effect the payment of the former without waiting
Article 1244. The debtor of a thing cannot compel the for the liquidation of the latter. (1169a)
creditor to receive a different one, although the latter
may be of the same value as, or more valuable than Article 1249. The payment of debts in money shall be
that which is due. made in the currency stipulated, and if it is not possible
to deliver such currency, then in the currency which is
In obligations to do or not to do, an act or forbearance legal tender in the Philippines.
cannot be substituted by another act or forbearance
against the obligee's will. (1166a) 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 the same must be applied. Unless the parties so
they have been impaired. stipulate, or when the application of payment is made
by the party for whose benefit the term has been
In the meantime, the action derived from the original constituted, application shall not be made as to debts
obligation shall be held in the abeyance. (1170) which are not yet due.

Article 1250. In case an extraordinary inflation or If the debtor accepts from the creditor a receipt in
deflation of the currency stipulated should supervene, which an application of the payment is made, the
the value of the currency at the time of the former cannot complain of the same, unless there is a
establishment of the obligation shall be the basis of cause for invalidating the contract. (1172a)
payment, unless there is an agreement to the contrary.
(n) Article 1253. If the debt produces interest, payment of
the principal shall not be deemed to have been made
Article 1251. Payment shall be made in the place until the interests have been covered. (1173)
designated in the obligation.
Article 1254. When the payment cannot be applied in
There being no express stipulation and if the accordance with the preceding rules, or if application
undertaking is to deliver a determinate thing, the can not be inferred from other circumstances, the debt
payment shall be made wherever the thing might be at which is most onerous to the debtor, among those due,
the moment the obligation was constituted. shall be deemed to have been satisfied.

In any other case the place of payment shall be the If the debts due are of the same nature and burden, the
domicile of the debtor. payment shall be applied to all of them proportionately.
(1174a)
If the debtor changes his domicile in bad faith or after
he has incurred in delay, the additional expenses shall SUBSECTION 2. Payment by Cession
be borne by him.
Article 1255. The debtor may cede or assign his
These provisions are without prejudice to venue under property to his creditors in payment of his debts. This
the Rules of Court. (1171a) cession, unless there is stipulation to the contrary, shall
only release the debtor from responsibility for the net
SUBSECTION 1. Application of Payments proceeds of the thing assigned. The agreements which,
on the effect of the cession, are made between the
Article 1252. He who has various debts of the same debtor and his creditors shall be governed by special
kind in favor of one and the same creditor, may declare laws. (1175a)
at the time of making the payment, to which of them
SUBSECTION 3. Tender of Payment and Consignation before whom the tender of payment shall be proved, in
a proper case, and the announcement of the
Article 1256. If the creditor to whom tender of payment consignation in other cases.
has been made refuses without just cause to accept it,
the debtor shall be released from responsibility by the The consignation having been made, the interested
consignation of the thing or sum due. parties shall also be notified thereof. (1178)

Consignation alone shall produce the same effect in the Article 1259. The expenses of consignation, when
following cases: properly made, shall be charged against the creditor.
(1179)
(1) When the creditor is absent or unknown, or does
not appear at the place of payment; Article 1260. Once the consignation has been duly
made, the debtor may ask the judge to order the
(2) When he is incapacitated to receive the payment at cancellation of the obligation.
the time it is due;
Before the creditor has accepted the consignation, or
(3) When, without just cause, he refuses to give a before a judicial declaration that the consignation has
receipt; been properly made, the debtor may withdraw the thing
or the sum deposited, allowing the obligation to remain
(4) When two or more persons claim the same right to in force. (1180)
collect;
Article 1261. If, the consignation having been made, the
(5) When the title of the obligation has been lost. creditor should authorize the debtor to withdraw the
(1176a) same, he shall lose every preference which he may
have over the thing. The co-debtors, guarantors and
Article 1257. In order that the consignation of the thing sureties shall be released. (1181a)
due may release the obligor, it must first be announced
to the persons interested in the fulfillment of the
obligation. SECTION 2
Loss of the Thing Due
The consignation shall be ineffectual if it is not made
strictly in consonance with the provisions which regulate Article 1262. An obligation which consists in the delivery
payment. (1177) of a determinate thing shall be extinguished if it should
be lost or destroyed without the fault of the debtor, and
Article 1258. Consignation shall be made by depositing before he has incurred in delay.
the things due at the disposal of judicial authority,
When by law or stipulation, the obligor is liable even for price, whatever may be the cause for the loss, unless
fortuitous events, the loss of the thing does not the thing having been offered by him to the person who
extinguish the obligation, and he shall be responsible should receive it, the latter refused without justification
for damages. The same rule applies when the nature of to accept it. (1185)
the obligation requires the assumption of risk. (1182a)
Article 1269. The obligation having been extinguished
Article 1263. In an obligation to deliver a generic thing, by the loss of the thing, the creditor shall have all the
the loss or destruction of anything of the same kind rights of action which the debtor may have against third
does not extinguish the obligation. (n) persons by reason of the loss. (1186)

Article 1264. The courts shall determine whether, under

the circumstances, the partial loss of the object of the SECTION 3
obligation is so important as to extinguish the Condonation or Remission of the Debt
obligation. (n)
Article 1270. Condonation or remission is essentially
Article 1265. Whenever the thing is lost in the gratuitous, and requires the acceptance by the obligor.
possession of the debtor, it shall be presumed that the It may be made expressly or impliedly.
loss was due to his fault, unless there is proof to the
contrary, and without prejudice to the provisions of One and the other kind shall be subject to the rules
article 1165. This presumption does not apply in case of which govern inofficious donations. Express condonation
earthquake, flood, storm, or other natural calamity. shall, furthermore, comply with the forms of donation.
(1183a) (1187)

Article 1266. The debtor in obligations to do shall also Article 1271. The delivery of a private document
be released when the prestation becomes legally or evidencing a credit, made voluntarily by the creditor to
physically impossible without the fault of the obligor. the debtor, implies the renunciation of the action which
(1184a) the former had against the latter.

Article 1267. When the service has become so difficult If in order to nullify this waiver it should be claimed to
as to be manifestly beyond the contemplation of the be inofficious, the debtor and his heirs may uphold it by
parties, the obligor may also be released therefrom, in proving that the delivery of the document was made in
whole or in part. (n) virtue of payment of the debt. (1188)

Article 1268. When the debt of a thing certain and Article 1272. Whenever the private document in which
determinate proceeds from a criminal offense, the the debt appears is found in the possession of the
debtor shall not be exempted from the payment of its
debtor, it shall be presumed that the creditor delivered Article 1278. Compensation shall take place when two
it voluntarily, unless the contrary is proved. (1189) persons, in their own right, are creditors and debtors of
each other. (1195)
Article 1273. The renunciation of the principal debt shall
extinguish the accessory obligations; but the waiver of Article 1279. In order that compensation may be
the latter shall leave the former in force. (1190) proper, it is necessary:

Article 1274. It is presumed that the accessory (1) That each one of the obligors be bound principally,
obligation of pledge has been remitted when the thing and that he be at the same time a principal creditor of
pledged, after its delivery to the creditor, is found in the the other;
possession of the debtor, or of a third person who owns
the thing. (1191a) (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
SECTION 4 stated;
Confusion or Merger of Rights
(3) That the two debts be due;
Article 1275. The obligation is extinguished from the
time the characters of creditor and debtor are merged (4) That they be liquidated and demandable;
in the same person. (1192a)
(5) That over neither of them there be any retention or
Article 1276. Merger which takes place in the person of controversy, commenced by third persons and
the principal debtor or creditor benefits the guarantors. communicated in due time to the debtor. (1196)
Confusion which takes place in the person of any of the
latter does not extinguish the obligation. (1193) Article 1280. Notwithstanding the provisions of the
preceding article, the guarantor may set up
Article 1277. Confusion does not extinguish a joint compensation as regards what the creditor may owe the
obligation except as regards the share corresponding to principal debtor. (1197)
the creditor or debtor in whom the two characters
concur. (1194) Article 1281. Compensation may be total or partial.
When the two debts are of the same amount, there is a
total compensation. (n)
SECTION 5
Compensation Article 1282. The parties may agree upon the
compensation of debts which are not yet due. (n)
Article 1283. If one of the parties to a suit over an obligations of a depositary or of a bailee in
obligation has a claim for damages against the other, commodatum.
the former may set it off by proving his right to said
damages and the amount thereof. (n) Neither can compensation be set up against a creditor
who has a claim for support due by gratuitous title,
Article 1284. When one or both debts are rescissible or without prejudice to the provisions of paragraph 2 of
voidable, they may be compensated against each other article 301. (1200a)
before they are judicially rescinded or avoided. (n)
Article 1288. Neither shall there be compensation if one
Article 1285. The debtor who has consented to the of the debts consists in civil liability arising from a penal
assignment of rights made by a creditor in favor of a offense. (n)
third person, cannot set up against the assignee the
compensation which would pertain to him against the Article 1289. If a person should have against him
assignor, unless the assignor was notified by the debtor several debts which are susceptible of compensation,
at the time he gave his consent, that he reserved his the rules on the application of payments shall apply to
right to the compensation. the order of the compensation. (1201)

If the creditor communicated the cession to him but the Article 1290. When all the requisites mentioned in
debtor did not consent thereto, the latter may set up article 1279 are present, compensation takes effect by
the compensation of debts previous to the cession, but operation of law, and extinguishes both debts to the
not of subsequent ones. concurrent amount, even though the creditors and
debtors are not aware of the compensation. (1202a)
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 SECTION 6
knowledge of the assignment. (1198a) Novation

Article 1286. Compensation takes place by operation of Article 1291. Obligations may be modified by:
law, even though the debts may be payable at different
places, but there shall be an indemnity for expenses of (1) Changing their object or principal conditions;
exchange or transportation to the place of payment.
(1199a) (2) Substituting the person of the debtor;

Article 1287. Compensation shall not be proper when (3) Subrogating a third person in the rights of the
one of the debts arises from a depositum or from the creditor. (1203)
Article 1292. In order that an obligation may be Article 1298. The novation is void if the original
extinguished by another which substitute the same, it is obligation was void, except when annulment may be
imperative that it be so declared in unequivocal terms, claimed only by the debtor or when ratification validates
or that the old and the new obligations be on every acts which are voidable. (1208a)
point incompatible with each other. (1204)
Article 1299. If the original obligation was subject to a
Article 1293. Novation which consists in substituting a suspensive or resolutory condition, the new obligation
new debtor in the place of the original one, may be shall be under the same condition, unless it is otherwise
made even without the knowledge or against the will of stipulated. (n)
the latter, but not without the consent of the creditor.
Payment by the new debtor gives him the rights Article 1300. Subrogation of a third person in the rights
mentioned in articles 1236 and 1237. (1205a) of the creditor is either legal or conventional. The
former is not presumed, except in cases expressly
Article 1294. If the substitution is without the mentioned in this Code; the latter must be clearly
knowledge or against the will of the debtor, the new established in order that it may take effect. (1209a)
debtor's insolvency or non-fulfillment of the obligations
shall not give rise to any liability on the part of the Article 1301. Conventional subrogation of a third person
original debtor. (n) requires the consent of the original parties and of the
third person. (n)
Article 1295. The insolvency of the new debtor, who has
been proposed by the original debtor and accepted by Article 1302. It is presumed that there is legal
the creditor, shall not revive the action of the latter subrogation:
against the original obligor, except when said insolvency
was already existing and of public knowledge, or known (1) When a creditor pays another creditor who is
to the debtor, when the delegated his debt. (1206a) preferred, even without the debtor's knowledge;

Article 1296. When the principal obligation is (2) When a third person, not interested in the
extinguished in consequence of a novation, accessory obligation, pays with the express or tacit approval of the
obligations may subsist only insofar as they may benefit debtor;
third persons who did not give their consent. (1207)
(3) When, even without the knowledge of the debtor, a
Article 1297. If the new obligation is void, the original person interested in the fulfillment of the obligation
one shall subsist, unless the parties intended that the pays, without prejudice to the effects of confusion as to
former relation should be extinguished in any event. (n) the latter's share. (1210a)
Article 1303. Subrogation transfers to the persons analogous nominate contracts, and by the customs of
subrogated the credit with all the rights thereto the place. (n)
appertaining, either against the debtor or against third
person, be they guarantors or possessors of mortgages, Article 1308. The contract must bind both contracting
subject to stipulation in a conventional subrogation. parties; its validity or compliance cannot be left to the
(1212a) will of one of them. (1256a)

Article 1304. A creditor, to whom partial payment has Article 1309. The determination of the performance may
been made, may exercise his right for the remainder, be left to a third person, whose decision shall not be
and he shall be preferred to the person who has been binding until it has been made known to both
subrogated in his place in virtue of the partial payment contracting parties. (n)
of the same credit. (1213)
Article 1310. The determination shall not be obligatory
if it is evidently inequitable. In such case, the courts
TITLE II shall decide what is equitable under the circumstances.
CONTRACTS (n)

Article 1311. Contracts take effect only between the

CHAPTER 1 parties, their assigns and heirs, except in case where
General Provisions the rights and obligations arising from the contract are
not transmissible by their nature, or by stipulation or by
Article 1305. A contract is a meeting of minds between provision of law. The heir is not liable beyond the value
two persons whereby one binds himself, with respect to of the property he received from the decedent.
the other, to give something or to render some service.
(1254a) If a contract should contain some stipulation in favor of
a third person, he may demand its fulfillment provided
Article 1306. The contracting parties may establish such he communicated his acceptance to the obligor before
stipulations, clauses, terms and conditions as they may its revocation. A mere incidental benefit or interest of a
deem convenient, provided they are not contrary to law, person is not sufficient. The contracting parties must
morals, good customs, public order, or public policy. have clearly and deliberately conferred a favor upon a
(1255a) third person. (1257a)

Article 1307. Innominate contracts shall be regulated by Article 1312. In contracts creating real rights, third
the stipulations of the parties, by the provisions of Titles persons who come into possession of the object of the
I and II of this Book, by the rules governing the most contract are bound thereby, subject to the provisions of
the Mortgage Law and the Land Registration Laws. (n)
 Article 1318. There is no contract unless the following
Article 1313. Creditors are protected in cases of requisites concur:
contracts intended to defraud them. (n)
(1) Consent of the contracting parties;
Article 1314. Any third person who induces another to
violate his contract shall be liable for damages to the (2) Object certain which is the subject matter of the
other contracting party. (n) contract;

Article 1315. Contracts are perfected by mere consent, (3) Cause of the obligation which is established. (1261)
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 SECTION 1
nature, may be in keeping with good faith, usage and Consent
law. (1258)
Article 1319. Consent is manifested by the meeting of
Article 1316. Real contracts, such as deposit, pledge the offer and the acceptance upon the thing and the
and commodatum, are not perfected until the delivery cause which are to constitute the contract. The offer
of the object of the obligation. (n) must be certain and the acceptance absolute. A
qualified acceptance constitutes a counter-offer.
Article 1317. No one may contract in the name of
another without being authorized by the latter, or unless Acceptance made by letter or telegram does not bind
he has by law a right to represent him. the offerer except from the time it came to his
knowledge. The contract, in such a case, is presumed to
A contract entered into in the name of another by one have been entered into in the place where the offer was
who has no authority or legal representation, or who made. (1262a)
has acted beyond his powers, shall be unenforceable,
unless it is ratified, expressly or impliedly, by the person Article 1320. An acceptance may be express or implied.
on whose behalf it has been executed, before it is (n)
revoked by the other contracting party. (1259a)
Article 1321. The person making the offer may fix the
time, place, and manner of acceptance, all of which
CHAPTER 2 must be complied with. (n)
Essential Requisites of Contracts
Article 1322. An offer made through an agent is
General Provisions accepted from the time acceptance is communicated to
him. (n)
Article 1323. An offer becomes ineffective upon the Article 1330. A contract where consent is given through
death, civil interdiction, insanity, or insolvency of either mistake, violence, intimidation, undue influence, or
party before acceptance is conveyed. (n) fraud is voidable. (1265a)

Article 1324. When the offerer has allowed the offeree a Article 1331. In order that mistake may invalidate
certain period to accept, the offer may be withdrawn at consent, it should refer to the substance of the thing
any time before acceptance by communicating such which is the object of the contract, or to those
withdrawal, except when the option is founded upon a conditions which have principally moved one or both
consideration, as something paid or promised. (n) parties to enter into the contract.

Article 1325. Unless it appears otherwise, business Mistake as to the identity or qualifications of one of the
advertisements of things for sale are not definite offers, parties will vitiate consent only when such identity or
but mere invitations to make an offer. (n) qualifications have been the principal cause of the
contract.
Article 1326. Advertisements for bidders are simply
invitations to make proposals, and the advertiser is not A simple mistake of account shall give rise to its
bound to accept the highest or lowest bidder, unless the correction. (1266a)
contrary appears. (n)
Article 1332. When one of the parties is unable to read,
Article 1327. The following cannot give consent to a or if the contract is in a language not understood by
contract: him, and mistake or fraud is alleged, the person
enforcing the contract must show that the terms thereof
(1) Unemancipated minors; have been fully explained to the former. (n)

(2) Insane or demented persons, and deaf-mutes who Article 1333. There is no mistake if the party alleging it
do not know how to write. (1263a) knew the doubt, contingency or risk affecting the object
of the contract. (n)
Article 1328. Contracts entered into during a lucid
interval are valid. Contracts agreed to in a state of Article 1334. Mutual error as to the legal effect of an
drunkenness or during a hypnotic spell are voidable. (n) agreement when the real purpose of the parties is
frustrated, may vitiate consent. (n)
Article 1329. The incapacity declared in article 1327 is
subject to the modifications determined by law, and is Article 1335. There is violence when in order to wrest
understood to be without prejudice to special consent, serious or irresistible force is employed.
disqualifications established in the laws. (1264)
There is intimidation when one of the contracting
parties is compelled by a reasonable and well-grounded Article 1340. The usual exaggerations in trade, when
fear of an imminent and grave evil upon his person or the other party had an opportunity to know the facts,
property, or upon the person or property of his spouse, are not in themselves fraudulent. (n)
descendants or ascendants, to give his consent.
Article 1341. A mere expression of an opinion does not
To determine the degree of intimidation, the age, sex signify fraud, unless made by an expert and the other
and condition of the person shall be borne in mind. party has relied on the former's special knowledge. (n)

A threat to enforce one's claim through competent Article 1342. Misrepresentation by a third person does
authority, if the claim is just or legal, does not vitiate not vitiate consent, unless such misrepresentation has
consent. (1267a) created substantial mistake and the same is mutual. (n)

Article 1336. Violence or intimidation shall annul the Article 1343. Misrepresentation made in good faith is
obligation, although it may have been employed by a not fraudulent but may constitute error. (n)
third person who did not take part in the contract.
(1268) Article 1344. In order that fraud may make a contract
voidable, it should be serious and should not have been
Article 1337. There is undue influence when a person employed by both contracting parties.
takes improper advantage of his power over the will of
another, depriving the latter of a reasonable freedom of Incidental fraud only obliges the person employing it to
choice. The following circumstances shall be considered: pay damages. (1270)
the confidential, family, spiritual and other relations
between the parties, or the fact that the person alleged Article 1345. Simulation of a contract may be absolute
to have been unduly influenced was suffering from or relative. The former takes place when the parties do
mental weakness, or was ignorant or in financial not intend to be bound at all; the latter, when the
distress. (n) parties conceal their true agreement. (n)

Article 1338. There is fraud when, through insidious Article 1346. An absolutely simulated or fictitious
words or machinations of one of the contracting parties, contract is void. A relative simulation, when it does not
the other is induced to enter into a contract which, prejudice a third person and is not intended for any
without them, he would not have agreed to. (1269) purpose contrary to law, morals, good customs, public
order or public policy binds the parties to their real
Article 1339. Failure to disclose facts, when there is a agreement. (n)
duty to reveal them, as when the parties are bound by
confidential relations, constitutes fraud. (n)
SECTION 2 Article 1351. The particular motives of the parties in
Object of Contracts entering into a contract are different from the cause
thereof. (n)
Article 1347. All things which are not outside the
commerce of men, including future things, may be the Article 1352. Contracts without cause, or with unlawful
object of a contract. All rights which are not cause, produce no effect whatever. The cause is
intransmissible may also be the object of contracts. unlawful if it is contrary to law, morals, good customs,
public order or public policy. (1275a)
No contract may be entered into upon future
inheritance except in cases expressly authorized by law. Article 1353. The statement of a false cause in contracts
shall render them void, if it should not be proved that
All services which are not contrary to law, morals, good they were founded upon another cause which is true
customs, public order or public policy may likewise be and lawful. (1276)
the object of a contract. (1271a)
Article 1354. Although the cause is not stated in the
Article 1348. Impossible things or services cannot be contract, it is presumed that it exists and is lawful,
the object of contracts. (1272) unless the debtor proves the contrary. (1277)

Article 1349. The object of every contract must be Article 1355. Except in cases specified by law, lesion or
determinate as to its kind. The fact that the quantity is inadequacy of cause shall not invalidate a contract,
not determinate shall not be an obstacle to the unless there has been fraud, mistake or undue
existence of the contract, provided it is possible to influence. (n)
determine the same, without the need of a new contract
between the parties. (1273)
CHAPTER 3
Form of Contracts
SECTION 3
Cause of Contracts Article 1356. Contracts shall be obligatory, in whatever
form they may have been entered into, provided all the
Article 1350. In onerous contracts the cause is essential requisites for their validity are present.
understood to be, for each contracting party, the However, when the law requires that a contract be in
prestation or promise of a thing or service by the other; some form in order that it may be valid or enforceable,
in remuneratory ones, the service or benefit which is or that a contract be proved in a certain way, that
remunerated; and in contracts of pure beneficence, the requirement is absolute and indispensable. In such
mere liberality of the benefactor. (1274) cases, the right of the parties stated in the following
article cannot be exercised. (1278a)
Article 1357. If the law requires a document or other CHAPTER 4
special form, as in the acts and contracts enumerated in Reformation of Instruments (n)
the following article, the contracting parties may compel
each other to observe that form, once the contract has Article 1359. When, there having been a meeting of the
been perfected. This right may be exercised minds of the parties to a contract, their true intention is
simultaneously with the action upon the contract. not expressed in the instrument purporting to embody
(1279a) the agreement, by reason of mistake, fraud, inequitable
conduct or accident, one of the parties may ask for the
Article 1358. The following must appear in a public reformation of the instrument to the end that such true
document: intention may be expressed.

(1) Acts and contracts which have for their object the If mistake, fraud, inequitable conduct, or accident has
creation, transmission, modification or extinguishment prevented a meeting of the minds of the parties, the
of real rights over immovable property; sales of real proper remedy is not reformation of the instrument but
property or of an interest therein are governed by annulment of the contract.
articles 1403, No. 2, and 1405;
Article 1360. The principles of the general law on the
(2) The cession, repudiation or renunciation of reformation of instruments are hereby adopted insofar
hereditary rights or of those of the conjugal partnership as they are not in conflict with the provisions of this
of gains; Code.

(3) The power to administer property, or any other Article 1361. When a mutual mistake of the parties
power which has for its object an act appearing or causes the failure of the instrument to disclose their
which should appear in a public document, or should real agreement, said instrument may be reformed.
prejudice a third person;
Article 1362. If one party was mistaken and the other
(4) The cession of actions or rights proceeding from an acted fraudulently or inequitably in such a way that the
act appearing in a public document. instrument does not show their true intention, the
former may ask for the reformation of the instrument.
All other contracts where the amount involved exceeds
five hundred pesos must appear in writing, even a Article 1363. When one party was mistaken and the
private one. But sales of goods, chattels or things in other knew or believed that the instrument did not state
action are governed by articles, 1403, No. 2 and 1405. their real agreement, but concealed that fact from the
(1280a) former, the instrument may be reformed.
Article 1364. When through the ignorance, lack of skill,
negligence or bad faith on the part of the person CHAPTER 5
drafting the instrument or of the clerk or typist, the Interpretation of Contracts
instrument does not express the true intention of the
parties, the courts may order that the instrument be Article 1370. If the terms of a contract are clear and
reformed. leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulations shall
Article 1365. If two parties agree upon the mortgage or control.
pledge of real or personal property, but the instrument
states that the property is sold absolutely or with a If the words appear to be contrary to the evident
right of repurchase, reformation of the instrument is intention of the parties, the latter shall prevail over the
proper. former. (1281)

Article 1366. There shall be no reformation in the Article 1371. In order to judge the intention of the
following cases: contracting parties, their contemporaneous and
subsequent acts shall be principally considered. (1282)
(1) Simple donations inter vivos wherein no condition is
imposed; Article 1372. However general the terms of a contract
may be, they shall not be understood to comprehend
(2) Wills; things that are distinct and cases that are different from
those upon which the parties intended to agree. (1283)
(3) When the real agreement is void.
Article 1373. If some stipulation of any contract should
Article 1367. When one of the parties has brought an admit of several meanings, it shall be understood as
action to enforce the instrument, he cannot bearing that import which is most adequate to render it
subsequently ask for its reformation. effectual. (1284)

Article 1368. Reformation may be ordered at the Article 1374. The various stipulations of a contract shall
instance of either party or his successors in interest, if be interpreted together, attributing to the doubtful ones
the mistake was mutual; otherwise, upon petition of the that sense which may result from all of them taken
injured party, or his heirs and assigns. jointly. (1285)

Article 1369. The procedure for the reformation of Article 1375. Words which may have different
instrument shall be governed by rules of court to be significations shall be understood in that which is most
promulgated by the Supreme Court. in keeping with the nature and object of the contract.
(1286)
 (1) Those which are entered into by guardians
Article 1376. The usage or custom of the place shall be whenever the wards whom they represent suffer lesion
borne in mind in the interpretation of the ambiguities of by more than one-fourth of the value of the things
a contract, and shall fill the omission of stipulations which are the object thereof;
which are ordinarily established. (1287)
(2) Those agreed upon in representation of absentees,
Article 1377. The interpretation of obscure words or if the latter suffer the lesion stated in the preceding
stipulations in a contract shall not favor the party who number;
caused the obscurity. (1288)
(3) Those undertaken in fraud of creditors when the
Article 1378. When it is absolutely impossible to settle latter cannot in any other manner collect the claims due
doubts by the rules established in the preceding them;
articles, and the doubts refer to incidental
circumstances of a gratuitous contract, the least (4) Those which refer to things under litigation if they
transmission of rights and interests shall prevail. If the have been entered into by the defendant without the
contract is onerous, the doubt shall be settled in favor knowledge and approval of the litigants or of competent
of the greatest reciprocity of interests. judicial authority;

If the doubts are cast upon the principal object of the (5) All other contracts specially declared by law to be
contract in such a way that it cannot be known what subject to rescission. (1291a)
may have been the intention or will of the parties, the
contract shall be null and void. (1289) Article 1382. Payments made in a state of insolvency for
obligations to whose fulfillment the debtor could not be
Article 1379. The principles of interpretation stated in compelled at the time they were effected, are also
Rule 123 of the Rules of Court shall likewise be rescissible. (1292)
observed in the construction of contracts. (n)
Article 1383. The action for rescission is subsidiary; it
cannot be instituted except when the party suffering
CHAPTER 6 damage has no other legal means to obtain reparation
Rescissible Contracts for the same. (1294)

Article 1380. Contracts validly agreed upon may be Article 1384. Rescission shall be only to the extent
rescinded in the cases established by law. (1290) necessary to cover the damages caused. (n)

Article 1381. The following contracts are rescissible: Article 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; for damages suffered by them on account of the
consequently, it can be carried out only when he who alienation, whenever, due to any cause, it should be
demands rescission can return whatever he may be impossible for him to return them.
obliged to restore.
If there are two or more alienations, the first acquirer
Neither shall rescission take place when the things shall be liable first, and so on successively. (1298a)
which are the object of the contract are legally in the
possession of third persons who did not act in bad faith. Article 1389. The action to claim rescission must be
commenced within four years.
In this case, indemnity for damages may be demanded
from the person causing the loss. (1295) For persons under guardianship and for absentees, the
period of four years shall not begin until the termination
Article 1386. Rescission referred to in Nos. 1 and 2 of of the former's incapacity, or until the domicile of the
article 1381 shall not take place with respect to latter is known. (1299)
contracts approved by the courts. (1296a)

Article 1387. All contracts by virtue of which the debtor CHAPTER 7

alienates property by gratuitous title are presumed to Voidable Contracts
have been entered into in fraud of creditors, when the
donor did not reserve sufficient property to pay all Article 1390. The following contracts are voidable or
debts contracted before the donation. annullable, even though there may have been no
damage to the contracting parties:
Alienations by onerous title are also presumed
fraudulent when made by persons against whom some (1) Those where one of the parties is incapable of giving
judgment has been rendered in any instance or some consent to a contract;
writ of attachment has been issued. The decision or
attachment need not refer to the property alienated, (2) Those where the consent is vitiated by mistake,
and need not have been obtained by the party seeking violence, intimidation, undue influence or fraud.
the rescission.
These contracts are binding, unless they are annulled
In addition to these presumptions, the design to by a proper action in court. They are susceptible of
defraud creditors may be proved in any other manner ratification. (n)
recognized by the law of evidence. (1297a)
Article 1391. The action for annulment shall be brought
Article 1388. Whoever acquires in bad faith the things within four years.
alienated in fraud of creditors, shall indemnify the latter
This period shall begin: capable cannot allege the incapacity of those with
whom they contracted; nor can those who exerted
In cases of intimidation, violence or undue influence, intimidation, violence, or undue influence, or employed
from the time the defect of the consent ceases. fraud, or caused mistake base their action upon these
flaws of the contract. (1302a)
In case of mistake or fraud, from the time of the
discovery of the same. Article 1398. An obligation having been annulled, the
contracting parties shall restore to each other the things
And when the action refers to contracts entered into by which have been the subject matter of the contract,
minors or other incapacitated persons, from the time with their fruits, and the price with its interest, except
the guardianship ceases. (1301a) in cases provided by law.

Article 1392. Ratification extinguishes the action to In obligations to render service, the value thereof shall
annul a voidable contract. (1309a) be the basis for damages. (1303a)

Article 1393. Ratification may be effected expressly or Article 1399. When the defect of the contract consists in
tacitly. It is understood that there is a tacit ratification the incapacity of one of the parties, the incapacitated
if, with knowledge of the reason which renders the person is not obliged to make any restitution except
contract voidable and such reason having ceased, the insofar as he has been benefited by the thing or price
person who has a right to invoke it should execute an received by him. (1304)
act which necessarily implies an intention to waive his
right. (1311a) Article 1400. Whenever the person obliged by the
decree of annulment to return the thing can not do so
Article 1394. Ratification may be effected by the because it has been lost through his fault, he shall
guardian of the incapacitated person. (n) return the fruits received and the value of the thing at
the time of the loss, with interest from the same date.
Article 1395. Ratification does not require the (1307a)
conformity of the contracting party who has no right to
bring the action for annulment. (1312) Article 1401. The action for annulment of contracts shall
be extinguished when the thing which is the object
Article 1396. Ratification cleanses the contract from all thereof is lost through the fraud or fault of the person
its defects from the moment it was constituted. (1313) who has a right to institute the proceedings.

Article 1397. The action for the annulment of contracts If the right of action is based upon the incapacity of any
may be instituted by all who are thereby obliged one of the contracting parties, the loss of the thing shall
principally or subsidiarily. However, persons who are not be an obstacle to the success of the action, unless
said loss took place through the fraud or fault of the (c) An agreement made in consideration of marriage,
plaintiff. (1314a) other than a mutual promise to marry;

Article 1402. As long as one of the contracting parties (d) An agreement for the sale of goods, chattels or
does not restore what in virtue of the decree of things in action, at a price not less than five hundred
annulment he is bound to return, the other cannot be pesos, unless the buyer accept and receive part of such
compelled to comply with what is incumbent upon him. goods and chattels, or the evidences, or some of them,
(1308) 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
CHAPTER 8 book, at the time of the sale, of the amount and kind of
Unenforceable Contracts (n) property sold, terms of sale, price, names of the
purchasers and person on whose account the sale is
Article 1403. The following contracts are unenforceable, made, it is a sufficient memorandum;
unless they are ratified:
(e) An agreement for the leasing for a longer period
(1) Those entered into in the name of another person than one year, or for the sale of real property or of an
by one who has been given no authority or legal interest therein;
representation, or who has acted beyond his powers;
( f ) A representation as to the credit of a third person.
(2) Those that do not comply with the Statute of Frauds
as set forth in this number. In the following cases an (3) Those where both parties are incapable of giving
agreement hereafter made shall be unenforceable by consent to a contract.
action, unless the same, or some note or memorandum,
thereof, be in writing, and subscribed by the party Article 1404. Unauthorized contracts are governed by
charged, or by his agent; evidence, therefore, of the article 1317 and the principles of agency in Title X of
agreement cannot be received without the writing, or a this Book.
secondary evidence of its contents:
Article 1405. Contracts infringing the Statute of Frauds,
(a) An agreement that by its terms is not to be referred to in No. 2 of article 1403, are ratified by the
performed within a year from the making thereof; failure to object to the presentation of oral evidence to
prove the same, or by the acceptance of benefit under
(b) A special promise to answer for the debt, default, or them.
miscarriage of another;
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 (5) Those which contemplate an impossible service;
may avail themselves of the right under Article 1357.
(6) Those where the intention of the parties relative to
Article 1407. In a contract where both parties are the principal object of the contract cannot be
incapable of giving consent, express or implied ascertained;
ratification by the parent, or guardian, as the case may
be, of one of the contracting parties shall give the (7) Those expressly prohibited or declared void by law.
contract the same effect as if only one of them were
incapacitated. These contracts cannot be ratified. Neither can the right
to set up the defense of illegality be waived.
If ratification is made by the parents or guardians, as
the case may be, of both contracting parties, the Article 1410. The action or defense for the declaration
contract shall be validated from the inception. of the inexistence of a contract does not prescribe.

Article 1408. Unenforceable contracts cannot be Article 1411. When the nullity proceeds from the
assailed by third persons. 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
CHAPTER 9 other, and both shall be prosecuted. Moreover, the
Void and Inexistent Contracts provisions of the Penal Code relative to the disposal of
effects or instruments of a crime shall be applicable to
Article 1409. The following contracts are inexistent and the things or the price of the contract.
void from the beginning:
This rule shall be applicable when only one of the
(1) Those whose cause, object or purpose is contrary to parties is guilty; but the innocent one may claim what
law, morals, good customs, public order or public he has given, and shall not be bound to comply with his
policy; promise. (1305)

(2) Those which are absolutely simulated or fictitious; Article 1412. If the act in which the unlawful or
forbidden cause consists does not constitute a criminal
(3) Those whose cause or object did not exist at the offense, the following rules shall be observed:
time of the transaction;
(1) When the fault is on the part of both contracting
(4) Those whose object is outside the commerce of parties, neither may recover what he has given by
men; virtue of the contract, or demand the performance of
the other's undertaking;
 law, any person paying any amount in excess of the
(2) When only one of the contracting parties is at fault, maximum price allowed may recover such excess.
he cannot recover what he has given by reason of the
contract, or ask for the fulfillment of what has been Article 1418. When the law fixes, or authorizes the
promised him. The other, who is not at fault, may fixing of the maximum number of hours of labor, and a
demand the return of what he has given without any contract is entered into whereby a laborer undertakes to
obligation to comply his promise. (1306) work longer than the maximum thus fixed, he may
demand additional compensation for service rendered
Article 1413. Interest paid in excess of the interest beyond the time limit.
allowed by the usury laws may be recovered by the
debtor, with interest thereon from the date of the Article 1419. When the law sets, or authorizes the
payment. setting of a minimum wage for laborers, and a contract
is agreed upon by which a laborer accepts a lower
Article 1414. When money is paid or property delivered wage, he shall be entitled to recover the deficiency.
for an illegal purpose, the contract may be repudiated
by one of the parties before the purpose has been Article 1420. In case of a divisible contract, if the illegal
accomplished, or before any damage has been caused terms can be separated from the legal ones, the latter
to a third person. In such case, the courts may, if the may be enforced.
public interest will thus be subserved, allow the party
repudiating the contract to recover the money or Article 1421. The defense of illegality of contract is not
property. available to third persons whose interests are not
directly affected.
Article 1415. Where one of the parties to an illegal
contract is incapable of giving consent, the courts may, Article 1422. A contract which is the direct result of a
if the interest of justice so demands allow recovery of previous illegal contract, is also void and inexistent.
money or property delivered by the incapacitated
person.
TITLE III
Article 1416. When the agreement is not illegal per se NATURAL OBLIGATIONS
but is merely prohibited, and the prohibition by the law
is designed for the protection of the plaintiff, he may, if Article 1423. Obligations are civil or natural. Civil
public policy is thereby enhanced, recover what he has obligations give a right of action to compel their
paid or delivered. performance. Natural obligations, not being based on
positive law but on equity and natural law, do not grant
Article 1417. When the price of any article or a right of action to enforce their performance, but after
commodity is determined by statute, or by authority of voluntary fulfillment by the obligor, they authorize the
retention of what has been delivered or rendered by has delivered or the payment of the value of the service
reason thereof. Some natural obligations are set forth in he has rendered.
the following articles.
Article 1429. When a testate or intestate heir voluntarily
Article 1424. When a right to sue upon a civil obligation pays a debt of the decedent exceeding the value of the
has lapsed by extinctive prescription, the obligor who property which he received by will or by the law of
voluntarily performs the contract cannot recover what intestacy from the estate of the deceased, the payment
he has delivered or the value of the service he has is valid and cannot be rescinded by the payer.
rendered.
Article 1430. When a will is declared void because it has
Article 1425. When without the knowledge or against not been executed in accordance with the formalities
the will of the debtor, a third person pays a debt which required by law, but one of the intestate heirs, after the
the obligor is not legally bound to pay because the settlement of the debts of the deceased, pays a legacy
action thereon has prescribed, but the debtor later in compliance with a clause in the defective will, the
voluntarily reimburses the third person, the obligor payment is effective and irrevocable.
cannot recover what he has paid.

Article 1426. When a minor between eighteen and TITLE IV

twenty-one years of age who has entered into a ESTOPPEL (n)
contract without the consent of the parent or guardian,
after the annulment of the contract voluntarily returns Article 1431. Through estoppel an admission or
the whole thing or price received, notwithstanding the representation is rendered conclusive upon the person
fact that he has not been benefited thereby, there is no making it, and cannot be denied or disproved as against
right to demand the thing or price thus returned. the person relying thereon.

Article 1427. When a minor between eighteen and Article 1432. The principles of estoppel are hereby
twenty-one years of age, who has entered into a adopted insofar as they are not in conflict with the
contract without the consent of the parent or guardian, provisions of this Code, the Code of Commerce, the
voluntarily pays a sum of money or delivers a fungible Rules of Court and special laws.
thing in fulfillment of the obligation, there shall be no
right to recover the same from the obligee who has Article 1433. Estoppel may in pais or by deed.
spent or consumed it in good faith. (1160A)
Article 1434. When a person who is not the owner of a
Article 1428. When, after an action to enforce a civil thing sells or alienates and delivers it, and later the
obligation has failed the defendant voluntarily performs seller or grantor acquires title thereto, such title passes
the obligation, he cannot demand the return of what he by operation of law to the buyer or grantee.
Article 1435. If a person in representation of another Article 1439. Estoppel is effective only as between the
sells or alienates a thing, the former cannot parties thereto or their successors in interest.
subsequently set up his own title as against the buyer
or grantee.

Article 1436. A lessee or a bailee is estopped from

asserting title to the thing leased or received, as against
the lessor or bailor.

Article 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.

Article 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.