June 18, 1949 CHAPTER 2

The Civil Code of the Philippines NATURE AND EFFECT OF OBLIGATIONS

AN ACT TO ORDAIN AND INSTITUTE THE CIVIL
CODE OF THE PHILIPPINES Art. 1163. Every person obliged to give
something is also obliged to take care of it with
BOOK IV
the proper diligence of a good father of a family,
OBLIGATIONS AND CONTRACTS
unless the law or the stipulation of the parties
requires another standard of care. (1094a)
Title. I. - OBLIGATIONS
Art. 1164. The creditor has a right to the fruits
CHAPTER 1 of the thing from the time the obligation to
GENERAL PROVISIONS deliver it arises. However, he shall acquire no
real right over it until the same has been
Art. 1156. An obligation is a juridical necessity to delivered to him. (1095)
give, to do or not to do. (n)
Art. 1165. When what is to be delivered is a
Art. 1157. Obligations arise from: determinate thing, the creditor, in addition to
(1) Law; the right granted him by Article 1170, may
compel the debtor to make the delivery.
(2) Contracts;
If the thing is indeterminate or generic, he may
(3) Quasi-contracts; ask that the obligation be complied with at the
(4) Acts or omissions punished by law; and expense of the debtor.

Civil law seminars If the obligor delays, or has promised to deliver

the same thing to two or more persons who do
Buy bestselling books online not have the same interest, he shall be
responsible for any fortuitous event until he has
(5) Quasi-delicts. (1089a)
effected the delivery. (1096)
Art. 1158. Obligations derived from law are not
Art. 1166. The obligation to give a determinate
presumed. Only those expressly determined in
thing includes that of delivering all its
this Code or in special laws are demandable,
accessions and accessories, even though they
and shall be regulated by the precepts of the
may not have been mentioned. (1097a)
law which establishes them; and as to what has
not been foreseen, by the provisions of this Art. 1167. If a person obliged to do something
Book. (1090) fails to do it, the same shall be executed at his
cost.
Art. 1159. Obligations arising from contracts
have the force of law between the contracting This same rule shall be observed if he does it in
parties and should be complied with in good contravention of the tenor of the obligation.
faith. (1091a) Furthermore, it may be decreed that what has
been poorly done be undone. (1098)
Art. 1160. Obligations derived from quasi-
contracts shall be subject to the provisions of Art. 1168. When the obligation consists in not
Chapter 1, Title XVII, of this Book. (n) doing, and the obligor does what has been
forbidden him, it shall also be undone at his
Art. 1161. Civil obligations arising from criminal
expense. (1099a)
offenses shall be governed by the penal laws,
subject to the provisions of Article 2177, and of Art. 1169. Those obliged to deliver or to do
the pertinent provisions of Chapter 2, something incur in delay from the time the
Preliminary Title, on Human Relations, and of obligee judicially or extrajudicially demands
Title XVIII of this Book, regulating damages. from them the fulfillment of their obligation.
(1092a)
However, the demand by the creditor shall not
Art. 1162. Obligations derived from quasi-delicts be necessary in order that delay may exist:
shall be governed by the provisions of Chapter
2, Title XVII of this Book, and by special laws. (1) When the obligation or the law expressly so
(1093a) declare; or

(2) When from the nature and the

circumstances of the obligation it appears that
the designation of the time when the thing is to
be delivered or the service is to be rendered
was a controlling motive for the establishment Art. 1177. The creditors, after having pursued
of the contract; or the property in possession of the debtor to
satisfy their claims, may exercise all the rights
(3) When demand would be useless, as when
and bring all the actions of the latter for the
the obligor has rendered it beyond his power to
same purpose, save those which are inherent in
perform.
his person; they may also impugn the acts which
In reciprocal obligations, neither party incurs in the debtor may have done to defraud them.
delay if the other does not comply or is not (1111)
ready to comply in a proper manner with what
Art. 1178. Subject to the laws, all rights acquired
is incumbent upon him. From the moment one
in virtue of an obligation are transmissible, if
of the parties fulfills his obligation, delay by the
there has been no stipulation to the contrary.
other begins. (1100a)
(1112)
Art. 1170. Those who in the performance of
their obligations are guilty of fraud, negligence,
or delay, and those who in any manner CHAPTER 3
contravene the tenor thereof, are liable for DIFFERENT KINDS OF OBLIGATIONS
damages. (1101)
SECTION 1. - Pure and Conditional Obligations
Art. 1171. Responsibility arising from fraud is
demandable in all obligations. Any waiver of an Art. 1179. Every obligation whose performance
action for future fraud is void. (1102a) does not depend upon a future or uncertain
event, or upon a past event unknown to the
Art. 1172. Responsibility arising from negligence
parties, is demandable at once.
in the performance of every kind of obligation is
also demandable, but such liability may be Every obligation which contains a resolutory
regulated by the courts, according to the condition shall also be demandable, without
circumstances. (1103) prejudice to the effects of the happening of the
event. (1113)
Art. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which Art. 1180. When the debtor binds himself to pay
is required by the nature of the obligation and when his means permit him to do so, the
corresponds with the circumstances of the obligation shall be deemed to be one with a
persons, of the time and of the place. When period, subject to the provisions of Article 1197.
negligence shows bad faith, the provisions of (n)
Articles 1171 and 2201, paragraph 2, shall apply.
Art. 1181. In conditional obligations, the
If the law or contract does not state the acquisition of rights, as well as the
diligence which is to be observed in the extinguishment or loss of those already
performance, that which is expected of a good acquired, shall depend upon the happening of
father of a family shall be required. (1104a) the event which constitutes the condition.
(1114)
Art. 1174. Except in cases expressly specified by
the law, or when it is otherwise declared by Art. 1182. When the fulfillment of the condition
stipulation, or when the nature of the obligation depends upon the sole will of the debtor, the
requires the assumption of risk, no person shall conditional obligation shall be void. If it depends
be responsible for those events which could not upon chance or upon the will of a third person,
be foreseen, or which, though foreseen, were the obligation shall take effect in conformity
inevitable. (1105a) with the provisions of this Code. (1115)

Art. 1175. Usurious transactions shall be Art. 1183. Impossible conditions, those contrary
governed by special laws. (n) to good customs or public policy and those
prohibited by law shall annul the obligation
Art. 1176. The receipt of the principal by the
which depends upon them. If the obligation is
creditor without reservation with respect to the
divisible, that part thereof which is not affected
interest, shall give rise to the presumption that
by the impossible or unlawful condition shall be
said interest has been paid.
valid.
The receipt of a later installment of a debt
The condition not to do an impossible thing
without reservation as to prior installments,
shall be considered as not having been agreed
shall likewise raise the presumption that such
upon. (1116a)
installments have been paid. (1110a)
Art. 1184. The condition that some event disappears in such a way that its existence is
happen at a determinate time shall extinguish unknown or it cannot be recovered;
the obligation as soon as the time expires or if it
(3) When the thing deteriorates without the
has become indubitable that the event will not
fault of the debtor, the impairment is to be
take place. (1117)
borne by the creditor;
Art. 1185. The condition that some event will
(4) If it deteriorates through the fault of the
not happen at a determinate time shall render
debtor, the creditor may choose between the
the obligation effective from the moment the
rescission of the obligation and its fulfillment,
time indicated has elapsed, or if it has become
with indemnity for damages in either case;
evident that the event cannot occur.
(5) If the thing is improved by its nature, or by
If no time has been fixed, the condition shall be
time, the improvement shall inure to the benefit
deemed fulfilled at such time as may have
of the creditor;
probably been contemplated, bearing in mind
the nature of the obligation. (1118) (6) If it is improved at the expense of the debtor,
he shall have no other right than that granted to
Art. 1186. The condition shall be deemed
the usufructuary. (1122)
fulfilled when the obligor voluntarily prevents
its fulfillment. (1119) Art. 1190. When the conditions have for their
purpose the extinguishment of an obligation to
Art. 1187. The effects of a conditional obligation
give, the parties, upon the fulfillment of said
to give, once the condition has been fulfilled,
conditions, shall return to each other what they
shall retroact to the day of the constitution of
have received.
the obligation. Nevertheless, when the
obligation imposes reciprocal prestations upon In case of the loss, deterioration or
the parties, the fruits and interests during the improvement of the thing, the provisions which,
pendency of the condition shall be deemed to with respect to the debtor, are laid down in the
have been mutually compensated. If the preceding article shall be applied to the party
obligation is unilateral, the debtor shall who is bound to return.
appropriate the fruits and interests received,
unless from the nature and circumstances of the As for the obligations to do and not to do, the
obligation it should be inferred that the provisions of the second paragraph of Article
intention of the person constituting the same 1187 shall be observed as regards the effect of
was different. the extinguishment of the obligation. (1123)

In obligations to do and not to do, the courts Art. 1191. The power to rescind obligations is
shall determine, in each case, the retroactive implied in reciprocal ones, in case one of the
effect of the condition that has been complied obligors should not comply with what is
with. (1120) incumbent upon him.

Art. 1188. The creditor may, before the The injured party may choose between the
fulfillment of the condition, bring the fulfillment and the rescission of the obligation,
appropriate actions for the preservation of his with the payment of damages in either case. He
right. may also seek rescission, even after he has
chosen fulfillment, if the latter should become
The debtor may recover what during the same impossible.
time he has paid by mistake in case of a
suspensive condition. (1121a) The court shall decree the rescission claimed,
unless there be just cause authorizing the fixing
Art. 1189. When the conditions have been of a period.
imposed with the intention of suspending the
efficacy of an obligation to give, the following This is understood to be without prejudice to
rules shall be observed in case of the the rights of third persons who have acquired
improvement, loss or deterioration of the thing the thing, in accordance with Articles 1385 and
during the pendency of the condition: 1388 and the Mortgage Law. (1124)

(1) If the thing is lost without the fault of the Art. 1192. In case both parties have committed
debtor, the obligation shall be extinguished; a breach of the obligation, the liability of the
first infractor shall be equitably tempered by the
(2) If the thing is lost through the fault of the courts. If it cannot be determined which of the
debtor, he shall be obliged to pay damages; it is parties first violated the contract, the same shall
understood that the thing is lost when it be deemed extinguished, and each shall bear
perishes, or goes out of commerce, or his own damages. (n)
SECTION 2. - Obligations with a Period establishment, and when through a fortuitous
event they disappear, unless he immediately
Art. 1193. Obligations for whose fulfillment a
gives new ones equally satisfactory;
day certain has been fixed, shall be demandable
only when that day comes. (4) When the debtor violates any undertaking,
in consideration of which the creditor agreed to
Obligations with a resolutory period take effect
the period;
at once, but terminate upon arrival of the day
certain. (5) When the debtor attempts to abscond.
(1129a)
A day certain is understood to be that which
must necessarily come, although it may not be SECTION 3. - Alternative Obligations
known when.
Art. 1199. A person alternatively bound by
If the uncertainty consists in whether the day different prestations shall completely perform
will come or not, the obligation is conditional, one of them.
and it shall be regulated by the rules of the
The creditor cannot be compelled to receive
preceding Section. (1125a)
part of one and part of the other undertaking.
Art. 1194. In case of loss, deterioration or (1131)
improvement of the thing before the arrival of
Art. 1200. The right of choice belongs to the
the day certain, the rules in Article 1189 shall be
debtor, unless it has been expressly granted to
observed. (n)
the creditor.
Art. 1195. Anything paid or delivered before the
The debtor shall have no right to choose those
arrival of the period, the obligor being unaware
prestations which are impossible, unlawful or
of the period or believing that the obligation has
which could not have been the object of the
become due and demandable, may be
obligation. (1132)
recovered, with the fruits and interests. (1126a)
Art. 1201. The choice shall produce no effect
Art. 1196. Whenever in an obligation a period is
except from the time it has been
designated, it is presumed to have been
communicated. (1133)
established for the benefit of both the creditor
and the debtor, unless from the tenor of the Art. 1202. The debtor shall lose the right of
same or other circumstances it should appear choice when among the prestations whereby he
that the period has been established in favor of is alternatively bound, only one is practicable.
one or of the other. (1127) (1134)
Art. 1197. If the obligation does not fix a period, Art. 1203. If through the creditor's acts the
but from its nature and the circumstances it can debtor cannot make a choice according to the
be inferred that a period was intended, the terms of the obligation, the latter may rescind
courts may fix the duration thereof. the contract with damages. (n)
The courts shall also fix the duration of the Art. 1204. The creditor shall have a right to
period when it depends upon the will of the indemnity for damages when, through the fault
debtor. of the debtor, all the things which are
alternatively the object of the obligation have
In every case, the courts shall determine such
been lost, or the compliance of the obligation
period as may under the circumstances have
has become impossible.
been probably contemplated by the parties.
Once fixed by the courts, the period cannot be The indemnity shall be fixed taking as a basis
changed by them. (1128a) the value of the last thing which disappeared, or
that of the service which last became
Art. 1198. The debtor shall lose every right to
impossible.
make use of the period:
Damages other than the value of the last thing
(1) When after the obligation has been
or service may also be awarded. (1135a)
contracted, he becomes insolvent, unless he
gives a guaranty or security for the debt; Art. 1205. When the choice has been expressly
given to the creditor, the obligation shall cease
(2) When he does not furnish to the creditor the
to be alternative from the day when the
guaranties or securities which he has promised;
selection has been communicated to the debtor.
(3) When by his own acts he has impaired said
Until then the responsibility of the debtor shall
guaranties or securities after their
be governed by the following rules:
(1) If one of the things is lost through a Art. 1210. The indivisibility of an obligation does
fortuitous event, he shall perform the obligation not necessarily give rise to solidarity. Nor does
by delivering that which the creditor should solidarity of itself imply indivisibility. (n)
choose from among the remainder, or that
Art. 1211. Solidarity may exist although the
which remains if only one subsists;
creditors and the debtors may not be bound in
(2) If the loss of one of the things occurs the same manner and by the same periods and
through the fault of the debtor, the creditor may conditions. (1140)
claim any of those subsisting, or the price of
Art. 1212. Each one of the solidary creditors
that which, through the fault of the former, has
may do whatever may be useful to the others,
disappeared, with a right to damages;
but not anything which may be prejudicial to
(3) If all the things are lost through the fault of the latter. (1141a)
the debtor, the choice by the creditor shall fall
Art. 1213. A solidary creditor cannot assign his
upon the price of any one of them, also with
rights without the consent of the others. (n)
indemnity for damages.
Art. 1214. The debtor may pay any one of the
The same rules shall be applied to obligations to
solidary creditors; but if any demand, judicial or
do or not to do in case one, some or all of the
extrajudicial, has been made by one of them,
prestations should become impossible. (1136a)
payment should be made to him. (1142a)
Art. 1206. When only one prestation has been
Art. 1215. Novation, compensation, confusion
agreed upon, but the obligor may render
or remission of the debt, made by any of the
another in substitution, the obligation is called
solidary creditors or with any of the solidary
facultative.
debtors, shall extinguish the obligation, without
The loss or deterioration of the thing intended prejudice to the provisions of Article 1219.
as a substitute, through the negligence of the
The creditor who may have executed any of
obligor, does not render him liable. But once the
these acts, as well as he who collects the debt,
substitution has been made, the obligor is liable
shall be liable to the others for the share in the
for the loss of the substitute on account of his
obligation corresponding to them. (1143)
delay, negligence or fraud. (n)
Art. 1216. The creditor may proceed against any
SECTION 4. - Joint and Solidary Obligations
one of the solidary debtors or some or all of
Art. 1207. The concurrence of two or more them simultaneously. The demand made against
creditors or of two or more debtors in one and one of them shall not be an obstacle to those
the same obligation does not imply that each which may subsequently be directed against the
one of the former has a right to demand, or that others, so long as the debt has not been fully
each one of the latter is bound to render, entire collected. (1144a)
compliance with the prestation. There is a
Art. 1217. Payment made by one of the solidary
solidary liability only when the obligation
debtors extinguishes the obligation. If two or
expressly so states, or when the law or the
more solidary debtors offer to pay, the creditor
nature of the obligation requires solidarity.
may choose which offer to accept.
(1137a)
He who made the payment may claim from his
Art. 1208. If from the law, or the nature or the
co-debtors only the share which corresponds to
wording of the obligations to which the
each, with the interest for the payment already
preceding article refers the contrary does not
made. If the payment is made before the debt is
appear, the credit or debt shall be presumed to
due, no interest for the intervening period may
be divided into as many shares as there are
be demanded.
creditors or debtors, the credits or debts being
considered distinct from one another, subject to When one of the solidary debtors cannot,
the Rules of Court governing the multiplicity of because of his insolvency, reimburse his share
suits. (1138a) to the debtor paying the obligation, such share
shall be borne by all his co-debtors, in
Art. 1209. If the division is impossible, the right
proportion to the debt of each. (1145a)
of the creditors may be prejudiced only by their
collective acts, and the debt can be enforced Art. 1218. Payment by a solidary debtor shall
only by proceeding against all the debtors. If not entitle him to reimbursement from his co-
one of the latter should be insolvent, the others debtors if such payment is made after the
shall not be liable for his share. (1139) obligation has prescribed or become illegal. (n)
Art. 1219. The remission made by the creditor those which are not susceptible of partial
of the share which affects one of the solidary performance shall be deemed to be indivisible.
debtors does not release the latter from his
When the obligation has for its object the
responsibility towards the co-debtors, in case
execution of a certain number of days of work,
the debt had been totally paid by anyone of
the accomplishment of work by metrical units,
them before the remission was effected.
or analogous things which by their nature are
(1146a)
susceptible of partial performance, it shall be
Art. 1220. The remission of the whole divisible.
obligation, obtained by one of the solidary
However, even though the object or service may
debtors, does not entitle him to reimbursement
be physically divisible, an obligation is indivisible
from his co-debtors. (n)
if so provided by law or intended by the parties.
Art. 1221. If the thing has been lost or if the
In obligations not to do, divisibility or
prestation has become impossible without the
indivisibility shall be determined by the
fault of the solidary debtors, the obligation shall
character of the prestation in each particular
be extinguished.
case. (1151a)
If there was fault on the part of any one of
SECTION 6. - Obligations with a Penal Clause
them, all shall be responsible to the creditor, for
the price and the payment of damages and Art. 1226. In obligations with a penal clause, the
interest, without prejudice to their action penalty shall substitute the indemnity for
against the guilty or negligent debtor. damages and the payment of interests in case of
noncompliance, if there is no stipulation to the
If through a fortuitous event, the thing is lost or
contrary. Nevertheless, damages shall be paid if
the performance has become impossible after
the obligor refuses to pay the penalty or is guilty
one of the solidary debtors has incurred in delay
of fraud in the fulfillment of the obligation.
through the judicial or extrajudicial demand
upon him by the creditor, the provisions of the The penalty may be enforced only when it is
preceding paragraph shall apply. (1147a) demandable in accordance with the provisions
of this Code. (1152a)
Art. 1222. A solidary debtor may, in actions filed
by the creditor, avail himself of all defenses Art. 1227. The debtor cannot exempt himself
which are derived from the nature of the from the performance of the obligation by
obligation and of those which are personal to paying the penalty, save in the case where this
him, or pertain to his own share. With respect right has been expressly reserved for him.
to those which personally belong to the others, Neither can the creditor demand the fulfillment
he may avail himself thereof only as regards of the obligation and the satisfaction of the
that part of the debt for which the latter are penalty at the same time, unless this right has
responsible. (1148a) been clearly granted him. However, if after the
creditor has decided to require the fulfillment of
SECTION 5. - Divisible and Indivisible
the obligation, the performance thereof should
Obligations
become impossible without his fault, the
Art. 1223. The divisibility or indivisibility of the penalty may be enforced. (1153a)
things that are the object of obligations in which
Art. 1228. Proof of actual damages suffered by
there is only one debtor and only one creditor
the creditor is not necessary in order that the
does not alter or modify the provisions of
penalty may be demanded. (n)
Chapter 2 of this Title. (1149)
Art. 1229. The judge shall equitably reduce the
Art. 1224. A joint indivisible obligation gives rise
penalty when the principal obligation has been
to indemnity for damages from the time anyone
partly or irregularly complied with by the
of the debtors does not comply with his
debtor. Even if there has been no performance,
undertaking. The debtors who may have been
the penalty may also be reduced by the courts if
ready to fulfill their promises shall not
it is iniquitous or unconscionable. (1154a)
contribute to the indemnity beyond the
corresponding portion of the price of the thing Art. 1230. The nullity of the penal clause does
or of the value of the service in which the not carry with it that of the principal obligation.
obligation consists. (1150)
The nullity of the principal obligation carries
Art. 1225. For the purposes of the preceding with it that of the penal clause. (1155)
articles, obligations to give definite things and
 CHAPTER 4 subrogate him in his rights, such as those arising
EXTINGUISHMENT OF OBLIGATIONS from a mortgage, guaranty, or penalty. (1159a)
GENERAL PROVISIONS
Art. 1238. Payment made by a third person who
does not intend to be reimbursed by the debtor
Art. 1231. Obligations are extinguished:
is deemed to be a donation, which requires the
(1) By payment or performance: debtor's consent. But the payment is in any case
valid as to the creditor who has accepted it. (n)
(2) By the loss of the thing due:
Art. 1239. In obligations to give, payment made
(3) By the condonation or remission of the debt;
by one who does not have the free disposal of
(4) By the confusion or merger of the rights of the thing due and capacity to alienate it shall
creditor and debtor; not be valid, without prejudice to the provisions
of Article 1427 under the Title on "Natural
(5) By compensation; Obligations." (1160a)
(6) By novation. Art. 1240. Payment shall be made to the person
Other causes of extinguishment of obligations, in whose favor the obligation has been
such as annulment, rescission, fulfillment of a constituted, or his successor in interest, or any
resolutory condition, and prescription, are person authorized to receive it. (1162a)
governed elsewhere in this Code. (1156a) Art. 1241. Payment to a person who is
incapacitated to administer his property shall be
SECTION 1. - Payment or Performance valid if he has kept the thing delivered, or
insofar as the payment has been beneficial to
Art. 1232. Payment means not only the delivery him.
of money but also the performance, in any
other manner, of an obligation. (n) Payment made to a third person shall also be
valid insofar as it has redounded to the benefit
Art. 1233. A debt shall not be understood to of the creditor. Such benefit to the creditor
have been paid unless the thing or service in need not be proved in the following cases:
which the obligation consists has been
completely delivered or rendered, as the case (1) If after the payment, the third person
may be. (1157) acquires the creditor's rights;

Art. 1234. If the obligation has been (2) If the creditor ratifies the payment to the
substantially performed in good faith, the third person;
obligor may recover as though there had been a (3) If by the creditor's conduct, the debtor has
strict and complete fulfillment, less damages been led to believe that the third person had
suffered by the obligee. (n) authority to receive the payment. (1163a)
Art. 1235. When the obligee accepts the Art. 1242. Payment made in good faith to any
performance, knowing its incompleteness or person in possession of the credit shall release
irregularity, and without expressing any protest the debtor. (1164)
or objection, the obligation is deemed fully
complied with. (n) Art. 1243. Payment made to the creditor by the
debtor after the latter has been judicially
Art. 1236. The creditor is not bound to accept ordered to retain the debt shall not be valid.
payment or performance by a third person who (1165)
has no interest in the fulfillment of the
obligation, unless there is a stipulation to the Art. 1244. The debtor of a thing cannot compel
contrary. the creditor to receive a different one, although
the latter may be of the same value as, or more
Whoever pays for another may demand from valuable than that which is due.
the debtor what he has paid, except that if he
paid without the knowledge or against the will In obligations to do or not to do, an act or
of the debtor, he can recover only insofar as the forbearance cannot be substituted by another
payment has been beneficial to the debtor. act or forbearance against the obligee's will.
(1158a) (1166a)

Art. 1237. Whoever pays on behalf of the Art. 1245. Dation in payment, whereby property
debtor without the knowledge or against the is alienated to the creditor in satisfaction of a
will of the latter, cannot compel the creditor to debt in money, shall be governed by the law of
sales. (n)
Art. 1246. When the obligation consists in the If the debtor changes his domicile in bad faith or
delivery of an indeterminate or generic thing, after he has incurred in delay, the additional
whose quality and circumstances have not been expenses shall be borne by him.
stated, the creditor cannot demand a thing of
These provisions are without prejudice to venue
superior quality. Neither can the debtor deliver
under the Rules of Court. (1171a)
a thing of inferior quality. The purpose of the
obligation and other circumstances shall be
taken into consideration. (1167a) SUBSECTION 1. - Application of Payments
Art. 1247. Unless it is otherwise stipulated, the Art. 1252. He who has various debts of the
extrajudicial expenses required by the payment same kind in favor of one and the same creditor,
shall be for the account of the debtor. With may declare at the time of making the payment,
regard to judicial costs, the Rules of Court shall to which of them the same must be applied.
govern. (1168a) Unless the parties so stipulate, or when the
application of payment is made by the party for
Art. 1248. Unless there is an express stipulation
whose benefit the term has been constituted,
to that effect, the creditor cannot be compelled
application shall not be made as to debts which
partially to receive the prestations in which the
are not yet due.
obligation consists. Neither may the debtor be
required to make partial payments. If the debtor accepts from the creditor a receipt
in which an application of the payment is made,
However, when the debt is in part liquidated
the former cannot complain of the same, unless
and in part unliquidated, the creditor may
there is a cause for invalidating the contract.
demand and the debtor may effect the payment
(1172a)
of the former without waiting for the liquidation
of the latter. (1169a) Art. 1253. If the debt produces interest,
payment of the principal shall not be deemed to
Art. 1249. The payment of debts in money shall
have been made until the interests have been
be made in the currency stipulated, and if it is
covered. (1173)
not possible to deliver such currency, then in
the currency which is legal tender in the Art. 1254. When the payment cannot be applied
Philippines. in accordance with the preceding rules, or if
application can not be inferred from other
The delivery of promissory notes payable to
circumstances, the debt which is most onerous
order, or bills of exchange or other mercantile
to the debtor, among those due, shall be
documents shall produce the effect of payment
deemed to have been satisfied.
only when they have been cashed, or when
through the fault of the creditor they have been If the debts due are of the same nature and
impaired. burden, the payment shall be applied to all of
them proportionately. (1174a)
In the meantime, the action derived from the
original obligation shall be held in the abeyance.
(1170) SUBSECTION 2. - Payment by Cession
Art. 1250. In case an extraordinary inflation or Art. 1255. The debtor may cede or assign his
deflation of the currency stipulated should property to his creditors in payment of his
supervene, the value of the currency at the time debts. This cession, unless there is stipulation to
of the establishment of the obligation shall be the contrary, shall only release the debtor from
the basis of payment, unless there is an responsibility for the net proceeds of the thing
agreement to the contrary. (n) assigned. The agreements which, on the effect
of the cession, are made between the debtor
Art. 1251. Payment shall be made in the place
and his creditors shall be governed by special
designated in the obligation.
laws. (1175a)
There being no express stipulation and if the
undertaking is to deliver a determinate thing,
SUBSECTION 3. - Tender of Payment and
the payment shall be made wherever the thing
Consignation
might be at the moment the obligation was
constituted. Art. 1256. If the creditor to whom tender of
payment has been made refuses without just
In any other case the place of payment shall be
cause to accept it, the debtor shall be released
the domicile of the debtor.
from responsibility by the consignation of the
thing or sum due.
Consignation alone shall produce the same without the fault of the debtor, and before he
effect in the following cases: has incurred in delay.

(1) When the creditor is absent or unknown, or When by law or stipulation, the obligor is liable
does not appear at the place of payment; even for fortuitous events, the loss of the thing
does not extinguish the obligation, and he shall
(2) When he is incapacitated to receive the
be responsible for damages. The same rule
payment at the time it is due;
applies when the nature of the obligation
(3) When, without just cause, he refuses to give requires the assumption of risk. (1182a)
a receipt;
Art. 1263. In an obligation to deliver a generic
(4) When two or more persons claim the same thing, the loss or destruction of anything of the
right to collect; same kind does not extinguish the obligation.
(n)
(5) When the title of the obligation has been
lost. (1176a) Art. 1264. The courts shall determine whether,
under the circumstances, the partial loss of the
Art. 1257. In order that the consignation of the object of the obligation is so important as to
thing due may release the obligor, it must first extinguish the obligation. (n)
be announced to the persons interested in the
fulfillment of the obligation. Art. 1265. Whenever the thing is lost in the
possession of the debtor, it shall be presumed
The consignation shall be ineffectual if it is not that the loss was due to his fault, unless there is
made strictly in consonance with the provisions proof to the contrary, and without prejudice to
which regulate payment. (1177) the provisions of article 1165. This presumption
Art. 1258. Consignation shall be made by does not apply in case of earthquake, flood,
depositing the things due at the disposal of storm, or other natural calamity. (1183a)
judicial authority, before whom the tender of Art. 1266. The debtor in obligations to do shall
payment shall be proved, in a proper case, and also be released when the prestation becomes
the announcement of the consignation in other legally or physically impossible without the fault
cases. of the obligor. (1184a)
The consignation having been made, the Art. 1267. When the service has become so
interested parties shall also be notified thereof. difficult as to be manifestly beyond the
(1178) contemplation of the parties, the obligor may
Art. 1259. The expenses of consignation, when also be released therefrom, in whole or in part.
properly made, shall be charged against the (n)
creditor. (1178) Art. 1268. When the debt of a thing certain and
Art. 1260. Once the consignation has been duly determinate proceeds from a criminal offense,
made, the debtor may ask the judge to order the debtor shall not be exempted from the
the cancellation of the obligation. payment of its price, whatever may be the
cause for the loss, unless the thing having been
Before the creditor has accepted the offered by him to the person who should
consignation, or before a judicial declaration receive it, the latter refused without justification
that the consignation has been properly made, to accept it. (1185)
the debtor may withdraw the thing or the sum
deposited, allowing the obligation to remain in Art. 1269. The obligation having been
force. (1180) extinguished by the loss of the thing, the
creditor shall have all the rights of action which
Art. 1261. If, the consignation having been the debtor may have against third persons by
made, the creditor should authorize the debtor reason of the loss. (1186)
to withdraw the same, he shall lose every
preference which he may have over the thing. SECTION 3. - Condonation or Remission of the
The co-debtors, guarantors and sureties shall be Debt
released. (1181a) Art. 1270. Condonation or remission is
SECTION 2. - Loss of the Thing Due essentially gratuitous, and requires the
acceptance by the obligor. It may be made
Art. 1262. An obligation which consists in the expressly or impliedly.
delivery of a determinate thing shall be
extinguished if it should be lost or destroyed One and the other kind shall be subject to the
rules which govern inofficious donations.
Express condonation shall, furthermore, comply the same kind, and also of the same quality if
with the forms of donation. (1187) the latter has been stated;

Art. 1271. The delivery of a private document (3) That the two debts be due;
evidencing a credit, made voluntarily by the
(4) That they be liquidated and demandable;
creditor to the debtor, implies the renunciation
of the action which the former had against the (5) That over neither of them there be any
latter. retention or controversy, commenced by third
persons and communicated in due time to the
If in order to nullify this waiver it should be
debtor. (1196)
claimed to be inofficious, the debtor and his
heirs may uphold it by proving that the delivery Art. 1280. Notwithstanding the provisions of the
of the document was made in virtue of payment preceding article, the guarantor may set up
of the debt. (1188) compensation as regards what the creditor may
owe the principal debtor. (1197)
Art. 1272. Whenever the private document in
which the debt appears is found in the Art. 1281. Compensation may be total or partial.
possession of the debtor, it shall be presumed When the two debts are of the same amount,
that the creditor delivered it voluntarily, unless there is a total compensation. (n)
the contrary is proved. (1189)
Art. 1282. The parties may agree upon the
Art. 1273. The renunciation of the principal debt compensation of debts which are not yet due.
shall extinguish the accessory obligations; but (n)
the waiver of the latter shall leave the former in
force. (1190) Art. 1283. If one of the parties to a suit over an
obligation has a claim for damages against the
Art. 1274. It is presumed that the accessory other, the former may set it off by proving his
obligation of pledge has been remitted when right to said damages and the amount thereof.
the thing pledged, after its delivery to the (n)
creditor, is found in the possession of the
debtor, or of a third person who owns the thing. Art. 1284. When one or both debts are
(1191a) rescissible or voidable, they may be
compensated against each other before they
SECTION 4. - Confusion or Merger of Rights are judicially rescinded or avoided. (n)
Art. 1275. The obligation is extinguished from Art. 1285. The debtor who has consented to the
the time the characters of creditor and debtor assignment of rights made by a creditor in favor
are merged in the same person. (1192a) of a third person, cannot set up against the
assignee the compensation which would pertain
Art. 1276. Merger which takes place in the
to him against the assignor, unless the assignor
person of the principal debtor or creditor
was notified by the debtor at the time he gave
benefits the guarantors. Confusion which takes
his consent, that he reserved his right to the
place in the person of any of the latter does not
compensation.
extinguish the obligation. (1193)
If the creditor communicated the cession to him
Art. 1277. Confusion does not extinguish a joint
but the debtor did not consent thereto, the
obligation except as regards the share
latter may set up the compensation of debts
corresponding to the creditor or debtor in
previous to the cession, but not of subsequent
whom the two characters concur. (1194)
ones.
SECTION 5. - Compensation
If the assignment is made without the
Art. 1278. Compensation shall take place when knowledge of the debtor, he may set up the
two persons, in their own right, are creditors compensation of all credits prior to the same
and debtors of each other. (1195) and also later ones until he had knowledge of
the assignment. (1198a)
Art. 1279. In order that compensation may be
proper, it is necessary: Art. 1286. Compensation takes place by
operation of law, even though the debts may be
(1) That each one of the obligors be bound
payable at different places, but there shall be an
principally, and that he be at the same time a
indemnity for expenses of exchange or
principal creditor of the other;
transportation to the place of payment. (1199a)
(2) That both debts consist in a sum of money,
Art. 1287. Compensation shall not be proper
or if the things due are consumable, they be of
when one of the debts arises from a depositum
or from the obligations of a depositary or of a Art. 1296. When the principal obligation is
bailee in commodatum. extinguished in consequence of a novation,
accessory obligations may subsist only insofar as
Neither can compensation be set up against a
they may benefit third persons who did not give
creditor who has a claim for support due by
their consent. (1207)
gratuitous title, without prejudice to the
provisions of paragraph 2 of Article 301. (1200a) Art. 1297. If the new obligation is void, the
original one shall subsist, unless the parties
Art. 1288. Neither shall there be compensation
intended that the former relation should be
if one of the debts consists in civil liability
extinguished in any event. (n)
arising from a penal offense. (n)
Art. 1298. The novation is void if the original
Art. 1289. If a person should have against him
obligation was void, except when annulment
several debts which are susceptible of
may be claimed only by the debtor or when
compensation, the rules on the application of
ratification validates acts which are voidable.
payments shall apply to the order of the
(1208a)
compensation. (1201)
Art. 1299. If the original obligation was subject
Art. 1290. When all the requisites mentioned in
to a suspensive or resolutory condition, the new
Article 1279 are present, compensation takes
obligation shall be under the same condition,
effect by operation of law, and extinguishes
unless it is otherwise stipulated. (n)
both debts to the concurrent amount, even
though the creditors and debtors are not aware Art. 1300. Subrogation of a third person in the
of the compensation. (1202a) rights of the creditor is either legal or
conventional. The former is not presumed,
SECTION 6. - Novation
except in cases expressly mentioned in this
Art. 1291. Obligations may be modified by: Code; the latter must be clearly established in
order that it may take effect. (1209a)
(1) Changing their object or principal conditions;
Art. 1301. Conventional subrogation of a third
(2) Substituting the person of the debtor; person requires the consent of the original
(3) Subrogating a third person in the rights of parties and of the third person. (n)
the creditor. (1203) Art. 1302. It is presumed that there is legal
Art. 1292. In order that an obligation may be subrogation:
extinguished by another which substitute the (1) When a creditor pays another creditor who
same, it is imperative that it be so declared in is preferred, even without the debtor's
unequivocal terms, or that the old and the new knowledge;
obligations be on every point incompatible with
each other. (1204) (2) When a third person, not interested in the
obligation, pays with the express or tacit
Art. 1293. Novation which consists in approval of the debtor;
substituting a new debtor in the place of the
original one, may be made even without the (3) When, even without the knowledge of the
knowledge or against the will of the latter, but debtor, a person interested in the fulfillment of
not without the consent of the creditor. the obligation pays, without prejudice to the
Payment by the new debtor gives him the rights effects of confusion as to the latter's share.
mentioned in Articles 1236 and 1237. (1205a) (1210a)

Art. 1294. If the substitution is without the Art. 1303. Subrogation transfers to the persons
knowledge or against the will of the debtor, the subrogated the credit with all the rights thereto
new debtor's insolvency or non-fulfillment of appertaining, either against the debtor or
the obligations shall not give rise to any liability against third person, be they guarantors or
on the part of the original debtor. (n) possessors of mortgages, subject to stipulation
in a conventional subrogation. (1212a)
Art. 1295. The insolvency of the new debtor,
who has been proposed by the original debtor Art. 1304. A creditor, to whom partial payment
and accepted by the creditor, shall not revive has been made, may exercise his right for the
the action of the latter against the original remainder, and he shall be preferred to the
obligor, except when said insolvency was person who has been subrogated in his place in
already existing and of public knowledge, or virtue of the partial payment of the same credit.
known to the debtor, when the delegated his (1213)
debt. (1206a)
Title II. - CONTRACTS Art. 1314. Any third person who induces
another to violate his contract shall be liable for
CHAPTER 1 damages to the other contracting party. (n)
GENERAL PROVISIONS
Art. 1315. Contracts are perfected by mere
Art. 1305. A contract is a meeting of minds consent, and from that moment the parties are
between two persons whereby one binds bound not only to the fulfillment of what has
himself, with respect to the other, to give been expressly stipulated but also to all the
something or to render some service. (1254a) consequences which, according to their nature,
may be in keeping with good faith, usage and
Art. 1306. The contracting parties may establish
law. (1258)
such stipulations, clauses, terms and conditions
as they may deem convenient, provided they Art. 1316. Real contracts, such as deposit,
are not contrary to law, morals, good customs, pledge and Commodatum, are not perfected
public order, or public policy. (1255a) until the delivery of the object of the obligation.
(n)
Art. 1307. Innominate contracts shall be
regulated by the stipulations of the parties, by Art. 1317. No one may contract in the name of
the provisions of Titles I and II of this Book, by another without being authorized by the latter,
the rules governing the most analogous or unless he has by law a right to represent him.
nominate contracts, and by the customs of the
A contract entered into in the name of another
place. (n)
by one who has no authority or legal
Art. 1308. The contract must bind both representation, or who has acted beyond his
contracting parties; its validity or compliance powers, shall be unenforceable, unless it is
cannot be left to the will of one of them. ratified, expressly or impliedly, by the person on
(1256a) whose behalf it has been executed, before it is
revoked by the other contracting party. (1259a)
Art. 1309. The determination of the
performance may be left to a third person,
whose decision shall not be binding until it has
been made known to both contracting parties.
CHAPTER 2
(n)
ESSENTIAL REQUISITES OF CONTRACTS
GENERAL PROVISIONS
Art. 1310. The determination shall not be
obligatory if it is evidently inequitable. In such Art. 1318. There is no contract unless the
case, the courts shall decide what is equitable following requisites concur:
under the circumstances. (n)
(1) Consent of the contracting parties;
Art. 1311. Contracts take effect only between
(2) Object certain which is the subject matter of
the parties, their assigns and heirs, except in
the contract;
case where the rights and obligations arising
from the contract are not transmissible by their (3) Cause of the obligation which is established.
nature, or by stipulation or by provision of law. (1261)
The heir is not liable beyond the value of the
property he received from the decedent. SECTION 1. - Consent

If a contract should contain some stipulation in Art. 1319. Consent is manifested by the meeting
favor of a third person, he may demand its of the offer and the acceptance upon the thing
fulfillment provided he communicated his and the cause which are to constitute the
acceptance to the obligor before its revocation. contract. The offer must be certain and the
A mere incidental benefit or interest of a person acceptance absolute. A qualified acceptance
is not sufficient. The contracting parties must constitutes a counter-offer.
have clearly and deliberately conferred a favor Acceptance made by letter or telegram does not
upon a third person. (1257a) bind the offerer except from the time it came to
Art. 1312. In contracts creating real rights, third his knowledge. The contract, in such a case, is
persons who come into possession of the object presumed to have been entered into in the
of the contract are bound thereby, subject to place where the offer was made. (1262a)
the provisions of the Mortgage Law and the Art. 1320. An acceptance may be express or
Land Registration Laws. (n) implied. (n)
Art. 1313. Creditors are protected in cases of
contracts intended to defraud them. (n)
Art. 1321. The person making the offer may fix A simple mistake of account shall give rise to its
the time, place, and manner of acceptance, all correction. (1266a)
of which must be complied with. (n)
Art. 1332. When one of the parties is unable to
Art. 1322. An offer made through an agent is read, or if the contract is in a language not
accepted from the time acceptance is understood by him, and mistake or fraud is
communicated to him. (n) alleged, the person enforcing the contract must
show that the terms thereof have been fully
Art. 1323. An offer becomes ineffective upon
explained to the former. (n)
the death, civil interdiction, insanity, or
insolvency of either party before acceptance is Art. 1333. There is no mistake if the party
conveyed. (n) alleging it knew the doubt, contingency or risk
affecting the object of the contract. (n)
Art. 1324. When the offerer has allowed the
offeree a certain period to accept, the offer may Art. 1334. Mutual error as to the legal effect of
be withdrawn at any time before acceptance by an agreement when the real purpose of the
communicating such withdrawal, except when parties is frustrated, may vitiate consent. (n)
the option is founded upon a consideration, as
Art. 1335. There is violence when in order to
something paid or promised. (n)
wrest consent, serious or irresistible force is
Art. 1325. Unless it appears otherwise, business employed.
advertisements of things for sale are not
There is intimidation when one of the
definite offers, but mere invitations to make an
contracting parties is compelled by a reasonable
offer. (n)
and well-grounded fear of an imminent and
Art. 1326. Advertisements for bidders are simply grave evil upon his person or property, or upon
invitations to make proposals, and the the person or property of his spouse,
advertiser is not bound to accept the highest or descendants or ascendants, to give his consent.
lowest bidder, unless the contrary appears. (n)
To determine the degree of intimidation, the
Art. 1327. The following cannot give consent to age, sex and condition of the person shall be
a contract: borne in mind.

(1) Unemancipated minors; A threat to enforce one's claim through

competent authority, if the claim is just or legal,
(2) Insane or demented persons, and deaf-
does not vitiate consent. (1267a)
mutes who do not know how to write. (1263a)
Art. 1336. Violence or intimidation shall annul
Art. 1328. Contracts entered into during a lucid
the obligation, although it may have been
interval are valid. Contracts agreed to in a state
employed by a third person who did not take
of drunkenness or during a hypnotic spell are
part in the contract. (1268)
voidable. (n)
Art. 1337. There is undue influence when a
Art. 1329. The incapacity declared in Article
person takes improper advantage of his power
1327 is subject to the modifications determined
over the will of another, depriving the latter of a
by law, and is understood to be without
reasonable freedom of choice. The following
prejudice to special disqualifications established
circumstances shall be considered: the
in the laws. (1264)
confidential, family, spiritual and other relations
Art. 1330. A contract where consent is given between the parties, or the fact that the person
through mistake, violence, intimidation, undue alleged to have been unduly influenced was
influence, or fraud is voidable. (1265a) suffering from mental weakness, or was
ignorant or in financial distress. (n)
Art. 1331. In order that mistake may invalidate
consent, it should refer to the substance of the Art. 1338. There is fraud when, through
thing which is the object of the contract, or to insidious words or machinations of one of the
those conditions which have principally moved contracting parties, the other is induced to
one or both parties to enter into the contract. enter into a contract which, without them, he
would not have agreed to. (1269)
Mistake as to the identity or qualifications of
one of the parties will vitiate consent only when Art. 1339. Failure to disclose facts, when there is
such identity or qualifications have been the a duty to reveal them, as when the parties are
principal cause of the contract. bound by confidential relations, constitutes
fraud. (n)
Art. 1340. The usual exaggerations in trade, without the need of a new contract between
when the other party had an opportunity to the parties. (1273)
know the facts, are not in themselves
SECTION 3. - Cause of Contracts
fraudulent. (n)
Art. 1350. In onerous contracts the cause is
Art. 1341. A mere expression of an opinion does
understood to be, for each contracting party,
not signify fraud, unless made by an expert and
the prestation or promise of a thing or service
the other party has relied on the former's
by the other; in remuneratory ones, the service
special knowledge. (n)
or benefit which is remunerated; and in
Art. 1342. Misrepresentation by a third person contracts of pure beneficence, the mere
does not vitiate consent, unless such liberality of the benefactor. (1274)
misrepresentation has created substantial
Art. 1351. The particular motives of the parties
mistake and the same is mutual. (n)
in entering into a contract are different from the
Art. 1343. Misrepresentation made in good faith cause thereof. (n)
is not fraudulent but may constitute error. (n)
Art. 1352. Contracts without cause, or with
Art. 1344. In order that fraud may make a unlawful cause, produce no effect whatever. The
contract voidable, it should be serious and cause is unlawful if it is contrary to law, morals,
should not have been employed by both good customs, public order or public policy.
contracting parties. (1275a)

Incidental fraud only obliges the person Art. 1353. The statement of a false cause in
employing it to pay damages. (1270) contracts shall render them void, if it should not
be proved that they were founded upon
Art. 1345. Simulation of a contract may be
another cause which is true and lawful. (1276)
absolute or relative. The former takes place
when the parties do not intend to be bound at Art. 1354. Although the cause is not stated in
all; the latter, when the parties conceal their the contract, it is presumed that it exists and is
true agreement. (n) lawful, unless the debtor proves the contrary.
(1277)
Art. 1346. An absolutely simulated or fictitious
contract is void. A relative simulation, when it Art. 1355. Except in cases specified by law,
does not prejudice a third person and is not lesion or inadequacy of cause shall not
intended for any purpose contrary to law, invalidate a contract, unless there has been
morals, good customs, public order or public fraud, mistake or undue influence. (n)
policy binds the parties to their real agreement.
(n)

SECTION 2. - Object of Contracts

CHAPTER 3
FORM OF CONTRACTS
Art. 1347. All things which are not outside the
commerce of men, including future things, may Art. 1356. Contracts shall be obligatory, in
be the object of a contract. All rights which are whatever form they may have been entered
not intransmissible may also be the object of into, provided all the essential requisites for
contracts. their validity are present. However, when the
law requires that a contract be in some form in
No contract may be entered into upon future
order that it may be valid or enforceable, or that
inheritance except in cases expressly authorized
a contract be proved in a certain way, that
by law.
requirement is absolute and indispensable. In
All services which are not contrary to law, such cases, the right of the parties stated in the
morals, good customs, public order or public following article cannot be exercised. (1278a)
policy may likewise be the object of a contract.
Art. 1357. If the law requires a document or
(1271a)
other special form, as in the acts and contracts
Art. 1348. Impossible things or services cannot enumerated in the following article, the
be the object of contracts. (1272) contracting parties may compel each other to
observe that form, once the contract has been
Art. 1349. The object of every contract must be perfected. This right may be exercised
determinate as to its kind. The fact that the simultaneously with the action upon the
quantity is not determinate shall not be an contract. (1279a)
obstacle to the existence of the contract,
provided it is possible to determine the same,
Art. 1358. The following must appear in a public Art. 1363. When one party was mistaken and
document: the other knew or believed that the instrument
did not state their real agreement, but
(1) Acts and contracts which have for their
concealed that fact from the former, the
object the creation, transmission, modification
instrument may be reformed.
or extinguishment of real rights over immovable
property; sales of real property or of an interest Art. 1364. When through the ignorance, lack of
therein a governed by Articles 1403, No. 2, and skill, negligence or bad faith on the part of the
1405; person drafting the instrument or of the clerk or
typist, the instrument does not express the true
(2) The cession, repudiation or renunciation of
intention of the parties, the courts may order
hereditary rights or of those of the conjugal
that the instrument be reformed.
partnership of gains;
Art. 1365. If two parties agree upon the
(3) The power to administer property, or any
mortgage or pledge of real or personal property,
other power which has for its object an act
but the instrument states that the property is
appearing or which should appear in a public
sold absolutely or with a right of repurchase,
document, or should prejudice a third person;
reformation of the instrument is proper.
(4) The cession of actions or rights proceeding
Art. 1366. There shall be no reformation in the
from an act appearing in a public document.
following cases:
All other contracts where the amount involved
(1) Simple donations inter vivos wherein no
exceeds five hundred pesos must appear in
condition is imposed;
writing, even a private one. But sales of goods,
chattels or things in action are governed by (2) Wills;
Articles, 1403, No. 2 and 1405. (1280a)
(3) When the real agreement is void.

Art. 1367. When one of the parties has brought

CHAPTER 4
an action to enforce the instrument, he cannot
REFORMATION OF INSTRUMENTS (n)
subsequently ask for its reformation.
Art. 1359. When, there having been a meeting Art. 1368. Reformation may be ordered at the
of the minds of the parties to a contract, their instance of either party or his successors in
true intention is not expressed in the interest, if the mistake was mutual; otherwise,
instrument purporting to embody the upon petition of the injured party, or his heirs
agreement, by reason of mistake, fraud, and assigns.
inequitable conduct or accident, one of the
parties may ask for the reformation of the Art. 1369. The procedure for the reformation of
instrument to the end that such true intention instrument shall be governed by rules of court
may be expressed. to be promulgated by the Supreme Court.

If mistake, fraud, inequitable conduct, or

accident has prevented a meeting of the minds CHAPTER 5
of the parties, the proper remedy is not INTERPRETATION OF CONTRACTS
reformation of the instrument but annulment of
the contract. Art. 1370. If the terms of a contract are clear
Art. 1360. The principles of the general law on and leave no doubt upon the intention of the
the reformation of instruments are hereby contracting parties, the literal meaning of its
adopted insofar as they are not in conflict with stipulations shall control.
the provisions of this Code. If the words appear to be contrary to the
Art. 1361. When a mutual mistake of the parties evident intention of the parties, the latter shall
causes the failure of the instrument to disclose prevail over the former. (1281)
their real agreement, said instrument may be Art. 1371. In order to judge the intention of the
reformed. contracting parties, their contemporaneous and
Art. 1362. If one party was mistaken and the subsequent acts shall be principally considered.
other acted fraudulently or inequitably in such a (1282)
way that the instrument does not show their Art. 1372. However general the terms of a
true intention, the former may ask for the contract may be, they shall not be understood
reformation of the instrument. to comprehend things that are distinct and
cases that are different from those upon which (2) Those agreed upon in representation of
the parties intended to agree. (1283) absentees, if the latter suffer the lesion stated in
the preceding number;
Art. 1373. If some stipulation of any contract
should admit of several meanings, it shall be (3) Those undertaken in fraud of creditors when
understood as bearing that import which is the latter cannot in any other manner collect
most adequate to render it effectual. (1284) the claims due them;

Art. 1374. The various stipulations of a contract (4) Those which refer to things under litigation if
shall be interpreted together, attributing to the they have been entered into by the defendant
doubtful ones that sense which may result from without the knowledge and approval of the
all of them taken jointly. (1285) litigants or of competent judicial authority;

Art. 1375. Words which may have different (5) All other contracts specially declared by law
significations shall be understood in that which to be subject to rescission. (1291a)
is most in keeping with the nature and object of
Art. 1382. Payments made in a state of
the contract. (1286)
insolvency for obligations to whose fulfillment
Art. 1376. The usage or custom of the place the debtor could not be compelled at the time
shall be borne in mind in the interpretation of they were effected, are also rescissible. (1292)
the ambiguities of a contract, and shall fill the
Art. 1383. The action for rescission is subsidiary;
omission of stipulations which are ordinarily
it cannot be instituted except when the party
established. (1287)
suffering damage has no other legal means to
Art. 1377. The interpretation of obscure words obtain reparation for the same. (1294)
or stipulations in a contract shall not favor the
Art. 1384. Rescission shall be only to the extent
party who caused the obscurity. (1288)
necessary to cover the damages caused. (n)
Art. 1378. When it is absolutely impossible to
Art. 1385. Rescission creates the obligation to
settle doubts by the rules established in the
return the things which were the object of the
preceding articles, and the doubts refer to
contract, together with their fruits, and the
incidental circumstances of a gratuitous
price with its interest; consequently, it can be
contract, the least transmission of rights and
carried out only when he who demands
interests shall prevail. If the contract is onerous,
rescission can return whatever he may be
the doubt shall be settled in favor of the
obliged to restore.
greatest reciprocity of interests.
Neither shall rescission take place when the
If the doubts are cast upon the principal object
things which are the object of the contract are
of the contract in such a way that it cannot be
legally in the possession of third persons who
known what may have been the intention or will
did not act in bad faith.
of the parties, the contract shall be null and
void. (1289) In this case, indemnity for damages may be
demanded from the person causing the loss.
Art. 1379. The principles of interpretation stated
(1295)
in Rule 123 of the Rules of Court shall likewise
be observed in the construction of contracts. (n) Art. 1386. Rescission referred to in Nos. 1 and 2
of Article 1381 shall not take place with respect
to contracts approved by the courts. (1296a)
CHAPTER 6
Art. 1387. All contracts by virtue of which the
RESCISSIBLE CONTRACTS
debtor alienates property by gratuitous title are
presumed to have been entered into in fraud of
Art. 1380. Contracts validly agreed upon may be
creditors, when the donor did not reserve
rescinded in the cases established by law. (1290)
sufficient property to pay all debts contracted
Art. 1381. The following contracts are before the donation.
rescissible:
Alienations by onerous title are also presumed
(1) Those which are entered into by guardians fraudulent when made by persons against
whenever the wards whom they represent whom some judgment has been issued. The
suffer lesion by more than one-fourth of the decision or attachment need not refer to the
value of the things which are the object thereof; property alienated, and need not have been
obtained by the party seeking the rescission.
In addition to these presumptions, the design to ratification if, with knowledge of the reason
defraud creditors may be proved in any other which renders the contract voidable and such
manner recognized by the law of evidence. reason having ceased, the person who has a
(1297a) right to invoke it should execute an act which
necessarily implies an intention to waive his
Art. 1388. Whoever acquires in bad faith the
right. (1311a)
things alienated in fraud of creditors, shall
indemnify the latter for damages suffered by Art. 1394. Ratification may be effected by the
them on account of the alienation, whenever, guardian of the incapacitated person. (n)
due to any cause, it should be impossible for
Art. 1395. Ratification does not require the
him to return them.
conformity of the contracting party who has no
If there are two or more alienations, the first right to bring the action for annulment. (1312)
acquirer shall be liable first, and so on
Art. 1396. Ratification cleanses the contract
successively. (1298a)
from all its defects from the moment it was
Art. 1389. The action to claim rescission must be constituted. (1313)
commenced within four years.
Art. 1397. The action for the annulment of
For persons under guardianship and for contracts may be instituted by all who are
absentees, the period of four years shall not thereby obliged principally or subsidiarily.
begin until the termination of the former's However, persons who are capable cannot
incapacity, or until the domicile of the latter is allege the incapacity of those with whom they
known. (1299) contracted; nor can those who exerted
intimidation, violence, or undue influence, or
employed fraud, or caused mistake base their
CHAPTER 7 action upon these flaws of the contract. (1302a)
VOIDABLE CONTRACTS Art. 1398. An obligation having been annulled,
the contracting parties shall restore to each
Art. 1390. The following contracts are voidable
other the things which have been the subject
or annullable, even though there may have
matter of the contract, with their fruits, and the
been no damage to the contracting parties:
price with its interest, except in cases provided
(1) Those where one of the parties is incapable by law.
of giving consent to a contract;
In obligations to render service, the value
(2) Those where the consent is vitiated by thereof shall be the basis for damages. (1303a)
mistake, violence, intimidation, undue influence
Art. 1399. When the defect of the contract
or fraud.
consists in the incapacity of one of the parties,
These contracts are binding, unless they are the incapacitated person is not obliged to make
annulled by a proper action in court. They are any restitution except insofar as he has been
susceptible of ratification. (n) benefited by the thing or price received by him.
(1304)
Art. 1391. The action for annulment shall be
brought within four years. Art. 1400. Whenever the person obliged by the
decree of annulment to return the thing can not
This period shall begin: do so because it has been lost through his fault,
In cases of intimidation, violence or undue he shall return the fruits received and the value
influence, from the time the defect of the of the thing at the time of the loss, with interest
consent ceases. from the same date. (1307a)

In case of mistake or fraud, from the time of the Art. 1401. The action for annulment of contracts
discovery of the same. shall be extinguished when the thing which is
the object thereof is lost through the fraud or
And when the action refers to contracts entered fault of the person who has a right to institute
into by minors or other incapacitated persons, the proceedings.
from the time the guardianship ceases. (1301a)
If the right of action is based upon the
Art. 1392. Ratification extinguishes the action to incapacity of any one of the contracting parties,
annul a voidable contract. (1309a) the loss of the thing shall not be an obstacle to
Art. 1393. Ratification may be effected expressly the success of the action, unless said loss took
or tacitly. It is understood that there is a tacit place through the fraud or fault of the plaintiff.
(1314a)
Art. 1402. As long as one of the contracting Art. 1404. Unauthorized contracts are governed
parties does not restore what in virtue of the by Article 1317 and the principles of agency in
decree of annulment he is bound to return, the Title X of this Book.
other cannot be compelled to comply with what
Art. 1405. Contracts infringing the Statute of
is incumbent upon him. (1308)
Frauds, referred to in No. 2 of Article 1403, are
ratified by the failure to object to the
presentation of oral evidence to prove the
same, or by the acceptance of benefit under
CHAPTER 8 them.
UNENFORCEABLE CONTRACTS (n) Art. 1406. When a contract is enforceable under
the Statute of Frauds, and a public document is
Art. 1403. The following contracts are
necessary for its registration in the Registry of
unenforceable, unless they are ratified:
Deeds, the parties may avail themselves of the
(1) Those entered into in the name of another right under Article 1357.
person by one who has been given no authority
Art. 1407. In a contract where both parties are
or legal representation, or who has acted
incapable of giving consent, express or implied
beyond his powers;
ratification by the parent, or guardian, as the
(2) Those that do not comply with the Statute of case may be, of one of the contracting parties
Frauds as set forth in this number. In the shall give the contract the same effect as if only
following cases an agreement hereafter made one of them were incapacitated.
shall be unenforceable by action, unless the
If ratification is made by the parents or
same, or some note or memorandum, thereof,
guardians, as the case may be, of both
be in writing, and subscribed by the party
contracting parties, the contract shall be
charged, or by his agent; evidence, therefore, of
validated from the inception.
the agreement cannot be received without the
writing, or a secondary evidence of its contents: Art. 1408. Unenforceable contracts cannot be
assailed by third persons.
(a) An agreement that by its terms is not to be
performed within a year from the making
thereof;
CHAPTER 9
(b) A special promise to answer for the debt, VOID AND INEXISTENT CONTRACTS
default, or miscarriage of another;
Art. 1409. The following contracts are inexistent
(c) An agreement made in consideration of
and void from the beginning:
marriage, other than a mutual promise to
marry; (1) Those whose cause, object or purpose is
contrary to law, morals, good customs, public
(d) An agreement for the sale of goods, chattels
order or public policy;
or things in action, at a price not less than five
hundred pesos, unless the buyer accept and (2) Those which are absolutely simulated or
receive part of such goods and chattels, or the fictitious;
evidences, or some of them, of such things in
(3) Those whose cause or object did not exist at
action or pay at the time some part of the
the time of the transaction;
purchase money; but when a sale is made by
auction and entry is made by the auctioneer in (4) Those whose object is outside the commerce
his sales book, at the time of the sale, of the of men;
amount and kind of property sold, terms of sale,
price, names of the purchasers and person on (5) Those which contemplate an impossible
whose account the sale is made, it is a sufficient service;
memorandum; (6) Those where the intention of the parties
(e) An agreement of the leasing for a longer relative to the principal object of the contract
period than one year, or for the sale of real cannot be ascertained;
property or of an interest therein; (7) Those expressly prohibited or declared void
(f) A representation as to the credit of a third by law.
person. These contracts cannot be ratified. Neither can
(3) Those where both parties are incapable of the right to set up the defense of illegality be
giving consent to a contract. waived.
Art. 1410. The action or defense for the enhanced, recover what he has paid or
declaration of the inexistence of a contract does delivered.
not prescribe.
Art. 1417. When the price of any article or
Art. 1411. When the nullity proceeds from the commodity is determined by statute, or by
illegality of the cause or object of the contract, authority of law, any person paying any amount
and the act constitutes a criminal offense, both in excess of the maximum price allowed may
parties being in pari delicto, they shall have no recover such excess.
action against each other, and both shall be
Art. 1418. When the law fixes, or authorizes the
prosecuted. Moreover, the provisions of
fixing of the maximum number of hours of
the Penal Code relative to the disposal of effects
labor, and a contract is entered into whereby a
or instruments of a crime shall be applicable to
laborer undertakes to work longer than the
the things or the price of the contract.
maximum thus fixed, he may demand additional
This rule shall be applicable when only one of compensation for service rendered beyond the
the parties is guilty; but the innocent one may time limit.
claim what he has given, and shall not be bound
Art. 1419. When the law sets, or authorizes the
to comply with his promise. (1305)
setting of a minimum wage for laborers, and a
Art. 1412. If the act in which the unlawful or contract is agreed upon by which a laborer
forbidden cause consists does not constitute a accepts a lower wage, he shall be entitled to
criminal offense, the following rules shall be recover the deficiency.
observed:
Art. 1420. In case of a divisible contract, if the
(1) When the fault is on the part of both illegal terms can be separated from the legal
contracting parties, neither may recover what ones, the latter may be enforced.
he has given by virtue of the contract, or
Art. 1421. The defense of illegality of contract is
demand the performance of the other's
not available to third persons whose interests
undertaking;
are not directly affected.
(2) When only one of the contracting parties is
Art. 1422. A contract which is the direct result of
at fault, he cannot recover what he has given by
a previous illegal contract, is also void and
reason of the contract, or ask for the fulfillment
inexistent.
of what has been promised him. The other, who
is not at fault, may demand the return of what
he has given without any obligation to comply
his promise. (1306)

Art. 1413. Interest paid in excess of the interest

allowed by the usury laws may be recovered by
the debtor, with interest thereon from the date
of the payment.

Art. 1414. When money is paid or property

delivered for an illegal purpose, the contract
may be repudiated by one of the parties before
the purpose has been accomplished, or before
any damage has been caused to a third person.
In such case, the courts may, if the public
interest will thus be subserved, allow the party
repudiating the contract to recover the money
or property.

Art. 1415. Where one of the parties to an illegal

contract is incapable of giving consent, the
courts may, if the interest of justice so demands
allow recovery of money or property delivered
by the incapacitated person.

Art. 1416. When the agreement is not illegal per

se but is merely prohibited, and the prohibition
by the law is designated for the protection of
the plaintiff, he may, if public policy is thereby