Doctrines Contracts

7/29/2019 Doctrines Contracts

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Batchelder vs. Central Bank

Issue: W/N Monetary Board resolutions create contracts between Central Bank and

dollar earner

Held: No. Monetary Board resolutions do not create contracts between Central Bank

and dollar earner. Considering the fundamental meaning of contracts under the

Civil Law and the nature of the administrative authority of the Monetary Board to

promulgate rules and regulations governing the monetary and banking system of thePhilippines, the Monetary Board Resolutions Nos. 857 dated June 17, 1960 and 695

dated April 28, 1961 are not contracts that give rise to obligations which must be

fulfilled by the Central Bank in favor of affected parties. These resolutions merely

lay down a general policy on the utilization of the dollar earnings of Filipino and

resident. American contractors undertaking projects in U.S. military bases.

Republic vs. Phil. Long Distance Telephone Co.

Freedom of parties to stipulate; Grounds for annulment.Parties can not be coerced

to enter into a contract where no agreement is had between them as to the principal

terms and conditions of the contract. Freedom to stipulate such terms and conditions

is of the essence of our contractual system, and by express provision of the statute, acontract may be annulled if tainted by violence, intimidation or undue influence

(Articles 1306, 1336, 1337, Civil Code of the Philippines).

Corpus vs. Court of Appeals

Contracts; An attorney-client relationship can be created by implied agreement,

as when the attorney actually rendered legal services for a person who is a close

friend. The obligation of such a person to pay attorneys fees is based on the law

of contracts concept of facio ut des (I do and you give).WE find respondent

Davids position meritorious. While there was no express agreement between

petitioner Corpus and respondent David as regards attorneys fees, the facts of the

case support the position of respondent David that there was at least an impliedagreement for the payment of attorneys fees. Petitioner s act of giving the check for

P2,000.00 through his aforestated April 18, 1962 letter to respondent David indicates

petitioners commitment to pay the former attorneys fees, which is stressed by

expressing that I wish I could give more but as you know we were banking on a SC

decision reinstating me and reimbursing my back salaries. This last sentiment

constitutes a promise to pay more upon his reinstatement and payment of his back

salaries. Petitioner ended his letter that he was looking forward to a continuation of

the case in the lower court, x x x, to which the certiorari-mandamus-quo warranto

case was remanded by the Supreme Court for further proceedings.

Moreover, the payment of attorneys fees to respondent David may also be jus tified

by virtue of the innominate contract of facio ut des (I do and you give) which is

based on the principle that no one shall unjustly enrich himself at the expense of

another. Innominate contracts have been elevated to a codal provision in the New

Civil Code by providing under Article 1307 that such contracts shall be regulated by

the stipulations of the parties, by the general provisions or principles of obligations

and contracts, by the rules governing the most analogous nominate contracts, and by

the customs of the people.

Cui v. Arellano University

Students and educational institutions; Scholarships; Stipulation whereby

student cannot transfer to another school without refunding scholarship cash

null and void.The stipulation in a contract, between a student and the school, that

the students scholarship is good only if he continues in the same school, and that he

waives his right to transfer to another school without refunding the equivalent of his

scholarship in cash is contrary to public policy and, hence, null and void because

scholarships are awarded in recognition of merit and to help gifted students in whom

society has an established interest or a first lien, and not to keep outstanding students

in school to bolster its prestige and increase its business potential.

Saura v. Sindico

THE RIGHT TO PRESENT ONE'S CANDIDACY; PUBLIC OFFICE; NOT

WITHIN COMMERCE OF MAN.Among those that may not be the subjectmatter (object) of contracts are certain rights of individuals, which the law and public

policy have deemed wise to exclude from the commerce of man. Among these are

the political rights conferred upon citizens, including, but not limited to one's right to

vote, the right to present one's candidacy to the people and to be voted to public

office, provided, however, that all the qualifications prescribed by law obtain. Such

rights may not, therefore, be bargained away or surrendered for consideration by the

citizen or unduly curtailed with impunity, for they are conferred not for individual or

private benefit or advantage but for the public good and interest.

Leal vs. Intermediate Appellate Court

Contracts are generally binding between the parties, their assigns and heirs;Under Art 1255 of the Civil Code of Spain, parts, clauses and conditions which

are contrary to public order are null and void.Contracts are generally binding

between the parties, their assigns and heirs; however, under Art. 1255 of the Civil

Code of Spain, which is applicable in this instance, pacts, clauses, and conditions

which are contrary to public order are null and void, thus, without any binding effect.

The equivalent provision in the Civil Code of the Philippines of Art. 1255 of the

Civil Code of Spain is Art. 1306; Public order and public policy, interpreted.

Parenthetically, the equivalent provision in the Civil Code of the Philippines is that

of Art. 1306, which states: That contracting parties may establish such stipulations,

clauses, terms and conditions as they may deem convenient, provided they are not

contrary to law, morals good customs, public order, or public policy. Public order

signifies the public weal-public policy. Essentially, therefore, public order and public


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policy mean one and the same thing. Public policy is simply the English equivalent

of orden publico in Art. 1255 of the Civil Code of Spain.

Prohibition to sell property to third parties which is indefinite and unlimited as

to time, which shall continue to be applicable even beyond the lifetime of the

original parties to the contract, is a nullity .One such condition which is contrary

to public policy is the present prohibition to sell to third parties, because the same

virtually amounts to a perpetual restriction on the right of ownership, specifically the

owners right to freely dispose of his properties. Thus, we hold that any such

prohibition, indefinite and unlimited as to time, so much so that it shall continue tobe applicable even beyond the lifetime of the original parties to the contract, is,

without doubt, a nullity. In the light of this pronouncement, we grant the petitioners

prayer for the cancellation of the annotations of this prohibition at the back of their

Transfer Certificates of Title.

Banco Filipino Savings & Mortgage Bank vs. Navarro

A contract which embodies an Escalation Clause authorizing automatic increase

in interest rates in the event a law increasing the lawful rates of interest that

may be charged, does not include a Central Bank Circular, which, altho',

having the face and effect of law, is not strictly a statute or a law.The

Escalation Clause reads as follows: "I/We hereby authorize Banco Filipino tocorrespondingly increase the interest rate stipulated in this contract without advance

notice to me/us in the event a law increasing the lawful rates of interest that may be

charged on this particular kind of loan." (Paragraphing and italics supplied) It is clear

from the stipulation between the parties that the interest rate may be increased "in the

event a law should be enacted increasing the lawful rate of interest that may be

charged on this particular kind of loan." The Escalation Clause was dependent on an

increase of rate made by "law" alone. CIRCULAR No. 494, although it has the effect

of law, is not a law. "Although a circular duly issued is not strictly a statute or a law,

it has, however, the force and effect of law." (Italics supplied). "An administrative

regulation adopted pursuant to law has the force and effect of law." "That

administrative rules and regulations have the force of law can no longer bequestioned." The distinction between a law and an administrative regulation is

recognized in the Monetary Board guidelines quoted in the letter to the

BORROWER of Ms. Paderes of September 24, 1976 (supra). According to the

guidelines, for a loan's interest to be subject to the increases provided in CIRCULAR

No. 494, there must be an Escalation Clause allowing the increase "in the event that

any law or Central Bank regulation is promulgated increasing the maximum interest

rate for loans." The guidelines thus presuppose that a Central Bank regulation is not

within the term "any law." The distinction is again recognized by P.D. No. 1684,

promulgated on March 17, 1980, adding section 7-a to the Usury Law, providing that

parties to an agreement pertaining to a loan could stipulate that the rate of interest

agreed upon may be increased in the event that the applicable maximum rate of

interest is increased "by law or by the Monetary Board." To quote: "Sec. 7-a. Parties

to an agreement pertaining to a loan or forbearance of money, goods or credits may

stipulate that the rate of interest agreed upon may be increased in the event that the

applicable maximum rate of interest is increased by law or by the Monetary Board:

Provided, That such stipulation shall be valid only if there is also a stipulation in the

agreement that the rate of interest agreed upon shall be reduced in the event that the

applicable maximum rate of interest is reduced by law or by the Monetary Board;

Provided, further, That the adjustment in the rate of interest agreed upon shall take

effect on or after the effectivity of the increase or decrease in the maximum rate of

interest."2. Same; Escalation Clause to be valid must include de-escalation clause .There

can be an increase in interest if increased by law or by the Monetary Board; and in

order for such stipulation to be valid, it must include a provision for reduction of the

stipulated interest "in the event that the applicable maximum rate of interest is

reduced by law or by the Monetary Board."

Florendo vs. Court of Appeals

Escalation clauses are valid stipulations in commercial contracts to maintain

fiscal stability and to retain the value of money in long term contracts.In

Banco Filipino Savings v. Mortgage Bank vs. Navarro, this Court in essence ruledthat in general there is nothing inherently wrong with escalation clauses. In IBAA vs.

Spouses Salazar, the Court reiterated the rule that escalation clauses are valid

stipulations in commercial contracts to maintain fiscal stability and to retain the

value of money in long term contracts.

Usury; By virtue of CB Circular 905, the Usury Law has been rendered

ineffective.We have already mentioned (and now reiterate our holding in several

cases) that by virtue of CB Circular 905, the Usury Law has been rendered

ineffective. Thus, petitioners' contention that the escalation clause is violative of the

said law is bereft of any merit.

The unilateral determination and imposition of increased interest rates by the

herein respondent bank is obviously violative of the principle of mutuality ofcontracts.On the other hand, it will not be amiss to point out that the unilateral

determination and imposition of increased interest rates by the herein respondent

bank is obviously violative of the principle of mutuality of contracts ordained in

Article 1308 of the Civil Code.

Velasco vs. Court of Appeals

Contracts; In the Deed of Quitclaim in question wherein Laigo Realty Corp. waived

in favor of GSIS its rights in favor of the subdivision in question arising out of its

development and assumed to pay the claims of any contractor, material furnisher, lot

buyer, etc. having connection with said development, the GSIS was not relieved of

any liability to petitioner for the cost of materials and labor the latter incurred in

building the subdivision houses if Laigo Realty Corp. is unable to pay them.What


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is more, the reliance of GSIS on the Deed of Quitclaim of May 7, 1970 is to Our

mind misplaced. We have analyzed this document carefully, and We are of the

considered view that it is actually evidence against GSIS. Even if what is unnatural

in ordinary business or industrial experience were assumed, that is, that GSIS was

unaware all along during the period of their construction of the work then being done

by petitioners,albeit it is possible there was no express consent given theretoby

and thru the aforementioned deed of quitclaim, GSIS agreed to receive and did

actually receive the benefits of what petitioners had accomplished or would

accomplish under their contracts with Laigo. So much so, that the dispositive portionof the quitclaim deed does not really relieve GSIS from liability to petitioners.

Properly viewed, GSIS virtually assumed under said deed, liability in regard to

claims like those of petitioners who might not be paid by Laigo albeit said liability

has been made subject to the reservation that it could seek indemnity from Laigo.

Upon the foregoing factual premises, the legal issue that arises is whether or not

GSIS is liable to the petitioners for the cost of the materials and labor furnished by

them in construction of the 63 houses now owned by the GSIS and for the

construction of which no payment has been made on the balance due petitioners. Our

considered view is and We so hold that even in equity alone, GSIS should pay the

petitioners. After all, it admits it has not collected from the ones who appear to be thebuyers thereof, albeit it must be collecting the installments on the lots. All it has to

do then is to pass on to them what it has to pay petitioners. In all, GSIS is, under the

peculiar circumstances of this case, the owner of said houses.

Contracts; Obligations; Evidence; While, it is of judicial notice that the costs of labor

and material have risen substantially since 1970, it is not fair to award petitioners

four times the value of the cost of their construction, but only interest at 12% per

annum since they filed their complaint.Coming now to the amount for which GSIS

is liable, We reiterate that, to be sure, there is evidence in the record, uncontradicted

at that, regarding the lower value of money at the time the demand upon GSIS was

made compared to that when petitioners furnished the labor and materials in

question. We are not, however, inclined to go along with the trial court that theamount demanded should be multiplied four times. We believe that it being a matter

of judicial notice that the prices of labor and material have substantially risen since

1970, it would be fair enough to make respondent liable for interest on the amount of

the demand, which is supported by evidence and not effectively disputed by GSIS in

its answer, at the rate of 12% per annum from the time petitioners filed their

complaint below on April 14, 1975.

Kauffman vs. National Bank

Stipulation in Favor of Third Person; Revocation of Such Stipulation.A stipulation

in favor of a third person cannot be revoked by the obligated party alone, without the

conformity of the other contracting party.

Bonifacio Bros. v. Mora

Contracts; Contracts take effect only between the parties thereto; Exception.

Contracts take effect only between the parties thereto, except in some specific

instances provided by law where the contract contains some stipulation in favor of a

third person which is known as a stipulation pour autrui or a provision in favor of a

third person not a party to the contract. Under this doctrine, a third person is allowed

to avail himself of a benef it granted to him by the terms of the contract, provided

that the contracting parties have clearly and deliberately conferred a favor upon such

person. Consequently, a third person, not a party to the contract, has no actionagainst the parties thereto, and cannot generally demand the enforcement of the

same.

Same; Stipulation pour autrui; When a third person has an enforceable interest in the

contract.The question of whether a third person has an enforceable interest in a

contract must be settled by determining whether the contracting parties intended to

tender him such an interest by deliberately inserting terms in their agreement with

the avowed purpose of conferring a favor upon such third person. The fairest test to

determine whether the interest of a third person in a contract is a stipulation pour

autrui or merely an incidental interest, is to rely upon the intention of the parties as

disclosed by their contract.

Florentino v. Encarnacion

Contracts; Extra-judicial partition; Land Registration; The validity of or compliance

with a stipulation appearing in an extra-judicial partition cannot be left to the will of

one of the parties.The stipulation (Exhibit 0-1) is part of an extra-judicial partition

(Exh. 0) duly agreed and signed by the parties, hence the same must bind the

contracting parties thereto and its validity or compliance cannot be left to the will of

one of them (Art. 1308, N.C.C.). Under Art. 1311 of the New Civil Code, this

stipulation takes effect between the parties, their assigns and heirs.

Same; Same; Same; A stipulation that the fruits of a parcel of land shall be used to

defray certain expenses connected with religious festivities or occasions is astipulation pour autrui.The second paragraph of Article 1311 above-quoted states

the law on stipulations pour autrui. Considering the nature and purpose of the

stipulation (Exh. 0-1), We hold that said stipulation is a stipulation pour autrui. A

stipulation pour autrui is a stipulation in favor of a third person conferring a clear and

deliberate favor upon him, and which stipulation is merely a part of a contract

entered into by the parties, neither of whom acted as agent of the third person, and

such third person may demands its fulfillment provided that he communicates his

acceptance to the obligor before it is revoked. The requisites are: (1) that the

application in favor of a third person should be a part, not the whole, of the contract;

(2) that the favorable stipulation should not be conditioned or compensated by any

kind of obligation whatever; and (3) neither of the contracting parties bears the legal

representation or authorization of third party.


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Same; Same; Same; Test to be used in determining whether stipulation constitutes a

valid stipulation pour autrui.The fairest test to determine whether the interest of

third person in a contract is a stipulation pour autrui or merely an incidental interest,

is to rely upon the intention of the parties as disclosed by their contract. In applying

this test, it matters not whether the stipulation is in the nature of a gift or whether

there is an obligation owing from the promisee to the third person. That no such

obligation exists may in some degree assist in determining whether the parties

intended to benefit a third person.

A stipulation pour autrui may be accepted anytime before it is revoked. Acceptance

of a stipulation pour autrui need not be in any particular form and may be inferred

from the beneficiarys enjoyment of the fruits flowing therefrom for a good number

of years.While a stipulation in favor of a third person has no binding effect in

itself before its acceptance by the party favored, the law does not provide when the

third person must make his acceptance. As a rule, there is no time limit; such third

person has all the time until the stipulation is revoked. Here, We find that the Church

accepted the stipulation in its favor before it is sought to be revoked by some of the

co-owners, namely the petitioners-appellees herein. It is not disputed that from the

time of the death of Dona Encarnacion Florentino in 1941, as had always been the

case since time immemorial, up to a year before the filing of their application in May1964, the Church had been enjoying the benefits of the stipulation. The enjoyment of

benefits flowing therefrom for almost seventeen years without question from any

quarters can only be construed as an implied acceptance by the Church of the

stipulation pour autrui before its revocation.

Same; Action; A party to a contract pour autrui may also bring an action for its

enforcement in the same manner as the beneficiary thereof.That one of the parties

to a contract pour autrui is entitled to bring an action for its enforcement or to

prevent its breach is too clear to need any extensive discussion. Upon the other hand,

that the contract involved contained a stipulation pour autrui amplifies this settled

rule only in the sense that the third person for whose benefit the contract was entered

into may also demand its fulfillment provided he had communicated his acceptancethereof to the obligor before the stipulation in his favor is revoked.

Bank of America v. IAC

No restitution of amount sent by a foreign bank thru telex with apatent ora latent

ambiguity payable to another person where the person credited by the local bank is

the proper beneficiary and the account number is correct.It is our considered

opinion that, in the tested telex, considered either as a patent ambiguity or as a latent

ambiguity, the beneficiary is Minami. The mention of Account No. 24506017, as

well as the name of Minami, has to be given more weight than the mention of the

name of ACTC. BANKAMERICA could not have very well disregarded that

account number. It could also be that the mention of ACTCs name was a further

identification of Minami, to prevent payment to a possible another Toshiyuko

Minami who may not be connected with ACTC. On the other hand, it should be

difficult to concede that, in the tested telex, Account No. 24506017 was

erroneously written and should be substituted by Account No. 19842012 in the

name of ACTC.

Same; Same; Same; Stipulation pour autrui; Contract between foreign bank and a

local bank asking the latter topay an amount to a beneficiary, is a stipulation pour

autrui.In Vargas Plow Factory, Inc. vs. Central Bank, it was held that the opening

of a letter of credit in favor of the exporter becomes ultimately but the result of astipulation pour autrui (27 SCRA 84 [1969]). Similarly, when KYOWA asked

BANKAMERICA to pay an amount to a beneficiary (either ACTC or Minami), the

eontract was between KYOWA and BANKAMERICA and it had a stipulation pour

autrui.

Marimperio v. CA

Civil Law; Contracts; Art. 1311 of Civil Code; A party who has not taken part in the

contract, cannot sue or be sued for the performance or cancellation thereof, unless he

has a real interest affected thereby.According to Article 1311 of the Civil Code, a

contract takes effect between the parties who made it, and also their assigns and

heirs, except in cases where the rights and obligations arising from the contract are

not transmissible by their nature, or by stipulation or by provision of law. Since a

contract may be violated only by the parties, thereto as against each other, in an

action upon that contract, the real parties in interest, either as plaintiff or as

defendant, must be parties to said contract. Therefore, a party who has not taken part

in it cannot sue or be sued for performance or for cancellation thereof, unless he

shows that he has a real interest affected thereby (Macias & Co. v. Warner Barnes &

Co., 43 Phil. 155 [1922] and Salonga v. Warner Barnes & Co., Ltd., 88 Phil. 125

[1951]; Coquia v. Fieldmen's Insurance Co., Inc., 26 SCRA 178 [1968]).

Same; Same; Lease; In a contract of sub-lease, the personality of the lessee does not

disappear and the sub-lease generally does not have any direct action against the

owner of the premises as lessor.In a sub-lease, there are two leases and twodistinct judicial relations although intimately connected and related to each other,

unlike in a case of assignment of lease, where the lessee transmits absolutely his

right, and his personality disappears; there only remains in the juridical relation two

persons, the lessor and the assignee who is converted into a lessee (Moreno,

Philippine Law Dictionary, 2nd ed., p. 594). In other words, in a contract of sub-

lease, the personality of the lessee does not disappear; he does not transmit

absolutely his rights and obligations to the sub-lessee; and the sub-lessee generally

does not have any direct action against the owner of the premises as lessor, to require

the compliance of the obligations contracted with the plaintiff as lessee, or vice versa

(10 Manresa, Spanish Civil Code, 438).

Daywalt v. Corp de PP Agustinos


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CONTRACTS; DAMAGES FOR BREACH; LIABILITY OF THIRD PARTY.

Whatever may be the character of the liability, if any, which a stranger to a contract

may incur by advising or assisting one of the parties to evade performance, he cannot

become more extensively liable in damages for the nonperformance of the contract

than the party in whose behalf he intermeddles.

2.ID.; ID.; MEASURE OF DAMAGES FOR BREACH OF CONTRACT.The

damages recoverable upon breach of contract are, primarily, the ordinary, natural and

in a sense the necessary damage resulting from the breach. Other damages, known asspecial damages, are recoverable where it appears that the particular conditions

which made such damages a probable consequence of the breach were known to the

delinquent party at the time the contract was made. This proposition must be

understood with the qualification that, if the damages are in the legal sense remote or

speculative, knowledge of the special conditions which render such damages

possible will not make them recoverable. Special damages of this character cannot be

recovered unless made the subject of special stipulation.

Gilchrist v. Cuddy

DAMAGES; INTERFERENCE WITH CONTRACTS BY STRANGERS.The

interference with lawful contracts by strangers thereto gives rise to an action for

damages in favor of the injured person. The law does not require that the responsibleperson shall have known the identity of the injured person.

Estate of K.H. Hemady v. Luzon Surety

So Ping Bun v. CA

Where there was no malice in the interference of a contract, and the impulse behind

ones conduct lies in a proper business interest rather than in wrongful motives, a

party cannot be a malicious interferer.As early as Gilchrist vs. Cuddy, we held that

where there was no malice in the interference of a contract, and the impulse behind

ones conduct lies in a proper business interest rather than in wrongful motives, a

party cannot be a malicious interferer. Where the alleged interferer is financiallyinterested, and such interest motivates his conduct, it cannot be said that he is an

officious or malicious intermeddler.

Same; Same; Same; Same; Same; While lack of malice precludes damages, it does

not relieve the interferer of the legal liability for entering into contracts and causing

breach of existing ones.While we do not encourage tort interferers seeking their

economic interest to intrude into existing contracts at the expense of others, however,

we find that the conduct herein complained of did not transcend the limits forbidding

an obligatory award for damages in the absence of any malice. The business desire is

there to make some gain to the detriment of the contracting parties. Lack of malice,

however, precludes damages. But it does not relieve petitioner of the legal liability

for entering into contracts and causing breach of existing ones. The respondent

appellate court correctly confirmed the permanent injunction and nullification of the

lease contracts between DCCSI and Trendsetter Marketing, without awarding

damages. The injunction saved the respondents from further damage or injury caused

by petitioners interference.

Sanchez v. Rigos

Offeror cannot withdraw offer arbitrarily,While the law permits the offeror to

withdraw the offer at any time before acceptance even before the period has expired,

some writers hold the view, that the offeror can not exercise this right in an arbitraryor capricious manner. This is upon the principle that an offer implies an obligation

on the part of offeror to maintain it for such length of time as to permit the offeree to

decide whether to accept or not, and therefore cannot arbitrarily revoke the offer

without being liable for damage which the offeree may suffer. A contrary view

would remove the stability and security of business transactions.

Sales; Consideration not presumed in an accepted unilateral promise to buy or lo

sell.Article 1354 of the Civil Code which presumes the existence of a

consideration in every contract applies to contracts in general, whereas the second

paragraph of Article 1479 thereof refers to sales in particular, and, more

specifically, to an accepted unilateral promise to buy or to sell. It is Article 1479

that controls defendants unilateral promise to sell her property to the plaintiff.

Same; Same; Same; Promisee in an accepted unilateral promise to sell must prove

existence of consideration.In order that said unilateral promise may be binding

upon the promisor, Article 1479 requires the concurrence of a condition, namely, that

the promise be supported by a consideration distinct from the price. Accordingly,

the promisee can not compel the promisor to comply with the promise, unless the

former establishes the existence of said distinct consideration. In other words, the

promisee has the burden of proving such consideration,

Same; Same; Same; Accepted promise to sell is an offer to sell and when accepted

becomes a contract of sale.In accepted unilateral promise to sell, since there may

be no valid contract without a cause or consideration, the promisor is not bound by

his promise and may, accordingly, withdraw it. Pending notice of its withdrawal, his

accepted promise partakes, however, of the nature of an offer to sell which, if

accepted, results in a perfected contract of sale.

Tong Brothers Co. v. IAC

Contracts; Form; The general rule is that a contract may be oral or written.A

contract may be entered into in whatever form except where the law requires a

document or other special form as in the contracts enumerated in Article 1388 of the

Civil Code. The general rule, therefore, is that a contract may be oral or written.

Same; Same; Fact that previous contracts were all oral does not necessarily mean

that all subsequent contracts of similar or allied nature should also be oral and


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procedure be the same.The fact that the parties' previous contracts for the repair of

the private respondent's vessels were all oral and that the procedure consisted merely

in the vessels being drydocked at the petitioner's shipyard and after repair the

petitioner would just send the bill to the private respondent, does not necessarily

result in a conclusive presumption that all subsequent contracts between the parties

of similar or allied nature should also be oral and the procedure be the same.

Velasco v. CA

A definite agreement on manner of payment essential to a binding contract of sale.It is not difficult to glean from the aforequoted averments that the petitioners

themselves admit that they and the respondent still had to meet and agree on how and

when the down-payment and the installment payments were to be paid. Such being

the situation, it cannot, therefore, be said that a definite and firm sales agreement

between the parties had been perfected over the lot in question. Indeed, this Court

has already ruled before that a definite agreement on the manner of payment of the

purchase price is an essential element in the formation of a binding and enforceable

contract of sale. The fact, therefore, that the petitioners delivered to the respondent

the sum of P10,000.00 as part of the down-payment that they had to pay cannot be

considered as sufficient proof of the perfection of any purchase and sale agreement

between the parties under article 1482 of the new Civil Code.

Ong Yiu v. CA

Contracts of adhesion; Philippine Air Lines limited carriage liability of P100.00 for

loss or delay of its passengers baggage held valid and binding absent higher value

declared for luggage and actual value of goods lost.While it may be true that

petitioner had not signed the plane ticket (Exh. 12), he i s nevertheless bound by

the provisions thereof. Such provisions have been held to be a part of the contract of

carriage, and valid and binding upon the passenger regardless of the latters lack of

knowledge or assent to the regulation. It is what is known as a contract of

adhesion, in regards which it has been said that contracts of adhesion wherein one

party imposes a ready made form of contract on the other, as the plane ticket in the

case at bar, are contracts not entirely prohibited.

The one who adheres to the contract is in reality free to reject it entirely; if he

adheres, he gives his consent. And as held in Randolph v. American Airlines, 103

Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349

S.W. 2d 483, a contract limiting liability upon an agreed valuation does not offend

against the policy of the law forbidding one from contracting against his own

negligence. Considering, therefore, that petitioner had failed to declare a higher

value for his baggage, he cannot be permitted a recovery in excess of P100.00.

Besides, passengers are advised not to place valuable items inside their baggage but

to avail of our V-cargo service (Exh. 1). It is likewise to be noted that there is

nothing in the evidence to show the actual value of the goods allegedly lost by

petitioner

Weldon v. CA

Civil Law; Contracts; Only an absolute or unqualified acceptance of a definite offer

manifests the consent necessary to perfect a contractThe first proposal submitted

by Weldon Construction for rendering service under a contract of supervision

(Exhibit "A") is simply that, a proposal. It never attained perfection as the contract

between the parties. Only an absolute or unqualified acceptance of a definite offer

manifests the consent necessary to perfect a contract (Article 1319, New Civil Code).

The advance payment of P10,000.00 Pesos was not an unqualified acceptance of the

offer contained in the first proposal (Exhibit "A") as in fact an entirely new proposal(Exhibit "4") was submitted by Weldon Construction subsequently. If, as claimed by

the petitioner, the parties had already agreed upon a contract of supervision under

Exhibit "A," why then was a second proposal made? Res ipsa loquitur. The existence

of the second proposal belies the perfection of any contract arising from the first

proposal.

Same; Same; Once a contract is shown to have been consummated or fully

performed by the parties thereto, its existence and binding effect can no longer be

disputedPetitioner's position is untenable. Once a contract is shown to have been

consummated or fully performed by the parties thereto, its existence and binding

effect can no longer be disputed. It is irrelevant and immaterial to dispute the due

execution of a contract. i.e. the date of signing by one of the parties, if both of them

have in fact performed their obligations thereunder and their respective signatures

and those of their witnesses appear upon the face of the document. Thus, even

assuming that the Building Contract in Exhibit "5" was signed by the private

respondent only after the Gay Theater building had been completed and the

stipulated price of P600,000.00 Pesos fully paid, such fact can no longer negate the

binding effect of that agreement if its existence and especially, its consummation can

be established by other evidence, e.g by the contemporaneous acts of the parties and

their having performed their respective obligations pursuant to the agreement.

C & C Commercial Corp. v. Menor

Taxation; Contracts; Government agency justified in refusing to avoid a contract to abidder who had no tax clearance certi ficate as required by Adm. Order No. 66 dated

June 26, 1967, 63 O.G. 6391.The Nawasa was justified in not awarding the

contract to C & C Commercial Corporation because it had no tax clearance

certificate. It had a pending tax case in the Bureau of Internal Revenue. The award to

C & C Commercial Corporation would be in gross contravention of Administrative

Order No. 66.

Same; Same; Same.Under Administrative Order No. 66, the Nawasa officials

would be subject to administrative disciplinary action if they awarded the contract to

C & C Commercial Corporation in spite of its unsettled tax liabilities.

Same; Same; Statutes; An administrative order requiring that bidders for governmentcontract must have a tax clearance certificate is applicable even though it was issued


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after the bidding, but before execution of the contract with the lowest bidder.It

erred because Administrative Order No. 66 (promulgated after Judge Cloribel had

rendered his decision of March 1, 1967) covers not only the bidding but also the

execution of any contract with the lowest bidder. In this case, at the time the said

order was issued, no award had as yet been made and when the award was to be

made, the said order was already in force.

A reservation to reject the bid of any bidder does not make it obligatory for a

government agency to award its contract to the lowest bidder.Moreover, it was notthe ministerial duty of the Nawasa officials to award the contract to C & C

Commercial Corporation even if it was the lowest bidder. The Nawasa in its

addendum No. 1 to the invitation to bid dated July 6, 1966 reserved the right to

reject the bid of any bidder (p. 35, Record on Appeal). Therefore, a bidder whose

bid is rejected has no cause for complaint nor a right to dispute the award to another

bidder (Esguerra & Sons vs. Aytona, 114 Phil. 1189; Surigao Mineral Reservation

Board vs. Cloribel, L-27072, July 31, 1968, 24 SCRA 491).

Tang v. CA

Contracts; Insurance Law; Evidence; Where the insurer sought to avoid payment of

life insurance policy on the ground that insured concealed or misrepresented her state

of health, said insurer is not obliged to show under Art. 1332 of the Civil Code thatthe English terms of the contract were read and explained to the insured, a Chinese.

That duty devolves on the onesthe beneficiarieswho would like to enforce the

insurance agreement.It should be noted that under Art. 1332 abovequoted, the

obligation to show that the terms of the contract had been fully explained to the party

who is unable to read or understand the language of the contract, when fraud or

mistake is alleged, devolves on the party seeking to enforce it. Here the insurance

company is not seeking to enforce the contracts; on the contrary, it is seeking to

avoid their performance. It is petitioner who is seeking to enforce them even as fraud

or mistake is not alleged. Accordingly, respondent company was under no obligation

to prove that the terms of the insurance contracts were fully explained to the other

party. Even if we were to say that the insurer is the one seeking the performance ofthe contracts by avoiding paying the claim, it has to be noted as above stated that

there has been no imputation of mistake or fraud by the illiterate insured whose

personality is represented by her beneficiary the petitioner herein. In sum, Art. 1332

is inapplicable to the case at bar. Considering the findings of both the CFI and Court

of Appeals that the insured was guilty of concealment as to her state of health, we

have to affirm.

Contracts; Insurance Law; Evidence; Insurance contracts are contracts uberimae

fidei. Insured must reveal all material facts within his knowledge.In a contract of

insurance each party must communicate to the other, in good faith, all facts within

his knowledge which are material to the contract, and which the other has not the

means of ascertaining *** (Section 27, Act 2427, as amended. Italics supplied). As

a general rule, a failure by the insured to disclose conditions affecting the risk, of

which he is aware makes the contract voidable at the option of the insurer (45 C.J.S.

153). The reason for this rule is that insurance policies are traditionally contracts

uberimae fidei which means most abundant good faith; absolute and perfect candor

or openness and honesty; the absence of any concealment or deception however

slight.

Cario v. CA

Contracts; Contracts which are absolutely simulated or fictitious are inexistent andnull and void ab initio.There is merit to the Encabos' claim that the simulated deed

of sale in favor of the Carios was executed in order to protect the money Quesada

invested in the purchase of the rights to the lot in question, which transfer of said lot

to his name was later on disapproved by the LTA. As can be gleaned from the

testimony of Josue Quesada, he did this by putting Cirila Vicencio as the vendee in

the simulated Deed of Sale, when in fact, Encabo and Quesada meant her only as a

dummy for the latter. To this effect Quesada testified, despite the warning given to

him by the court that his statement might incriminate him. Such candor in the

testimony of Quesada gives credibility to the Encabos' claim.

Lagunzad v. Gonzales

Contracts; Duties must comply with contracts entered into where provisions thereofare not contrary to law, morals, good customs, public orders or public policy.It is

necessary to distinguish between real duress and the motive which is present when

one gives his consent reluctantly. A contract is valid even though one of the parties

entered into it against his own wish and desires, or even against his better judgment.

In legal effect, there is no difference between a contract wherein one of the

contracting parties exchanges one condition for another because he looks for greater

profit or gain by reason of such change, and an agreement wherein one of the

contracting parties agrees to accept the lesser of two disadvantages. In either case, he

makes a choice free and untramelled and must accordingly abide by it. The

Licensing Agreement has the force of law between the contracting parties and since

its provisions are not contrary to law, morals, good customs, public order or publicpolicy (Art. 1306, Civil Code), petitioner should comply with it in good faith.

Law v. Olympic Sawmill

Civil Law; Obligations; Damages; Liquidated damages, nature of; Presumption that

the amount of P6,000 obligation, added to the P10,000 principal obligation after

extension of payment of original obligation, exists and is lawful unless the debtor

proves the contrary; P6,000 obligation considered as liquidated damages.Under

Article 1354 of the Civil Code, in regards to the agreement of the parties relative to

the P6,000.00 obligation, it is presumed that it exists and is lawful, unless the debtor

proves the contrary. No evidentiary hearing having been held, it has to be concluded

that defendants had not proven that the P6,000.00 obligation was illegal.

Confirming the Trial Courts finding, we view the P6,000.00 obligation as liquidated


8/16

damages suffered by plaintiff, as of March 17, 1960, representing loss of interest

income, attorneys fees and incidentals.

Lao Sok v. Sabaysabay

Same; Same; Same; Separation Pay; Perfected Contract; Where the employer offered

the employees payment of separation pay which offer was unconditionally accepted

a contract was perfected; Contracts, though orally made are binding on the parties.

Lao Sok made an offer which was duly accepted by the private respondents. There

was, therefore, a meeting of the minds between two parties whereby one boundhimself with respect to the other, to give something or to render some service

(Article 1305, Civil Code). By the unconditional acceptance of the offer that they

would be paid separation pay, a contract was therefore perfected. As held in the case

of Herrera v. Auditor General, (102 Phil. 875): x x x Contracts in whatever form they

may have been entered into are binding on the parties unless form is essential for the

validity and enforceability of that particular contract. (See Lopez v. Auditor General,

20 SCRA 655).

Gallardo v. IAC

Same; Same; Same; Same; Registration of a private deed of sale by the Register of

Deeds is unauthorized and does not lend validity to the defective private document of

sale; Right of a vendee of registered property in a private document.True, asargued by appellants, a private conveyance of registered property is valid as between

the parties. However, the only right the vendee of registered property in a private

document is to compel through court processes the vendor to execute a deed of

conveyance sufficient in law for purposes of registration. Plaintiffs-appellants

reliance on Article 1356 of the Civil Code is unfortunate. The general rule

enunciated in said Art. 1356 is that contracts are obligatory, in whatever form they

may have been entered, provided all the essential requisites for their validity are

present. The next sentence provides the exception, requiring a contract to be in some

form when the law so requires for validity or enforceability. Said law is Section 127

of Act 496 which requires, among other things, that the conveyance be executed

before the judge of a court of record or clerk of a court record of a notary public or ajustice of the peace, who shall certify such acknowledgment substantially in form

next hereinafter stated. Such law was violated in this case. The action of the

Register of Deeds of Laguna in allowing the registration of the private deed of sale

was unauthorized and did not lend a bit of validity to the defective private document

of sale.

Lim v. CA

Contracts; Interpretation shall not favor the party who caused the ambiguity. Thus,

the one who prepared the contract which states: Terms: Cash upon signing of this

contract, cannot deny that the agreement was not a cash transaction.Considering

the admitted fact that the contract of sale (Exhibit A) was prepared in the office of

respondent company by Generoso Bongato, Assistant to the Manager of the

company, upon instruction of General Manager Emiliano L. Abalos who is a lawyer,

and We are now confronted with the varying or conflicting interpretations of the

parties thereto, the respondent company contending that the stipulation Terms: Cash

upon signing of this contract does not mean that the agreement was a cash

transaction because no money was paid by the petitioner at the time of the signing

thereof whereas the petitioner insists that it was a cash transaction inasmuch as he

paid cash amounting to P142,975.00 upon the signing of the contract, the payment

having been made at around 1:30 in the afternoon of November 13, 1970 to the

cashier, Teodoro Garcia, and Manager Abalos although the sale was agreed to in themorning of the same day, November 13, 1970, the conflicting interpretations have

shrouded the stipulation with ambiguity or vagueness. Then, the cardinal rule should

and must apply, which is that the interpretation shall not favor the party who caused

the ambiguity (Art. 1377, New Civil Code). We rule that in the instant case, the

interpretation to be taken shall not favor the respondent company since it is the party

who caused the ambiguity in its preparation.

Same; Contemporaneous acts of the parties as indication of their contractual

relation.The above facts show contemporaneous and subsequent acts of the parties

in relation to the transaction between them as embodied in the Contract of Sale of

Sugar (Exh. A) from which the intention of the contracting parties may be judged

correctly. The trial court was correct in judging and deciding the intention of the

parties from their actuations contemporaneous with and subsequent to the agreement

for the sale of the sugar in question, and we sustain the trial court, applying Art.

1371, New Civil Code, supra.

Republic v. Castellvi

Contracts; Construction of; Intention cannot prevail over the clear and express terms

of the contract.Intention cannot prevail over the clear and express terms of the

lease contract. Intent is to be deduced from the language employed by the parties,

and the terms of the contract, when unambiguous, are conclusive in the absence of

averment and proof of mistake or fraudthe question being not what the intention

was, but what is expressed in the language used. Moreover, in order to judge theintention of the contracting parties, their contemporaneous and subsequent acts shall

be principally considered.

Same; Same; General terms of contract cannot include things different from those

intended by the parties.However general the terms of a contract may be, they shall

not be understood to comprehend things that are distinct and cases that are different

from those upon which the parties intended to agree.

Eastern Shipping v. Margarina-Verkaufs-Union

Cabaliw v. Sadorra


9/16

Sale; Contracts; A sale of a parcel of land by the husband is deemed fraudulent if

made about seven months after a judgment was rendered against the vendor for

support of his wife and the vendor has not paid any part of the judgment.For the

heart of the matter is that about seven months after a judgment was rendered against

him in Civil Case No. 43192 of the Court of First Instance of Manila and without

paying any part of that judgment, Benigno Sadorra sold the only two parcels of land

belonging to the conjugal partnership to his son-in-law. Such a sale even if made for

a valuable consideration is presumed to be in fraud of the judgment creditor who in

this case happens to be the offended wife.

Same; Same; Circumstances indicating sale of a parcel of land belonging to conjugal

partnership is void.Furthermore, the presumption established by the law in favor

of petitioners is bolstered by other indicia of bad faith on the part of the vendor and

vendee. Thus (1) the vendee is the son-in-law of the vendor. x x x close relationship

between the vendor and the vendee is one of the known badges of fraud. (2) At the

time of the conveyance, the vendee, Sotero, was living with his father-in-law, the

vendor, and he knew that there was a judgment directing the latter to give a monthly

support to his wife Isidora and that his father-in-law was avoiding payment and

execution of the judgment. (3) It was known to the vendee that his father-in-law had

no properties other than those two parcels of land which were being sold to him. The

fact that a vendor transfers all of his property to a third person when there is a

judgment against him is a strong indication of a scheme to defraud one who may

have a valid interest over his properties.

Same; Same; Fraud; Where sale of land is presumed fraudulent, transferee has

burden of proving otherwise.On the part of the transferee, he did not present

satisfactory and convincing evidence sufficient to overthrow the presumption and

evidence of a fradulent transaction. His is the burden of rebutting the presumption of

fraud established by law, and having failed to do so, the fraudulent nature of the

conveyance in question prevails.

Sale; Contracts; Conjugal assets; Wife may seek redress in courts for alienationsprejudicial to her.The decision of the Court of Appeals makes mention of Art.

1413 of the old Civil Code which authorizes the husband as administrator to alienate

and bind by onerous title the property of the conjugal partnership without the consent

of the wife. x x x On this point, counsel for petitioners rightly claims that the lack of

consent of the wife to the conveyances made by her husband was never invoked nor

placed in issue before the trial court. What was claimed all along by plaintiff-

petitioner was that the conveyances or deeds of sale were executed by her husband to

avoid payment of the monthly support adjudged in her favor and to deprive her of the

means to execute said judgment. In other words, petitioner seeks relief not so much

as an aggrieved wife but more as a judgment creditor. Art. 1413 therefore is

inapplicable; but even if it were, the result would be the same because the very

article reserves to the wife the right to seek redress in court for alienations which

prejudice her or her heirs.

Hongkong & Shanghai Bank v. Pauli

Civil Law; Property; Actions; The four-year period to bring an action for annulment

of deed of sale of lot is computed from the registration of the conveyance; Reason.

When a transaction involves registered land, the four-year period fixed in Article

1391 within which to bring an action for annulment of the deed, shall be computed

from the registration of the conveyance (March 5, 1963) on the familiar theory thatthe registration of the document is constructive notice of the conveyance to the

whole world (Armentia vs. Patriarca, 18 SCRA 1253; Avecilla vs. Yatco, 103 Phil.

666).

Same; Same; Same; Same; Land Titles; Effect if the four-year period commenced to

run from the date when the bank obtained actual knowledge of the fraudulent sale of

the land or that the 4-year period had not yet expired.Plaintiffs submission that

the four-year period commenced to run from the date when the Bank obtained actual

knowledge of the fraudulent sale of Paulis land to the Garganeras (sometime in

1969) and that hence the four-year period for bringing an action to annul the sale had

not yet expired when it filed the action for annulment on February 17, 1971, is

unacceptable. That theory would diminish public faith in the integrity of torrens titlesand impair commercial transactions involving registered lands for it would render

uncertain the computation of the period for the prescription of such actions.

Felipe v. Heirs of Aldon

A contract of sale of land made by the wife without the husbands consent is

voidable.The view that the contract made by Gimena is a voidable contract is

supported by the legal provision that contracts entered by the husband without the

consent of the wife when such consent is required, are annullable at her instance

during the marriage and within ten years from the transaction questioned.

Wifes contract of sale can be annulled by the husband during the marriage, but notby the wife nor their children.The voidable contract of Gimena was subject to

annulment by her husband only during the marriage because he was the victim who

had an interest in the contract. Gimena, who was the party responsible for the defect,

could not ask for its annulment. Their children could not likewise seek the annulment

of the contract while the marriage subsisted because they merely had an inchoate

right to the lands sold.

House Intl. v. IAC

As bases for a declaration that the conditional sale between GSIS and

CENTERTOWN is null and void for being contrary to law or public policy, the

constitutional provisions are inapposite. Not one of those provisions render unlawful

the contract in question. Except for the prohibition against the taking of private


10/16

property for public use without just compensation, the other provisions require

implementing legislation to confer a legal right and impose a legal duty which can be

judicially invoked.

Same; Same; Void contract, different from ultra vires contract, which is merely

voidable.The main thrust of the petitioners challenge on the validity of the

conditional sale is that the contract is ultra vires because the respondent

CENTERTOWN is not qualified to acquire properties under its Articles of

Incorporation. The petitioner has confused a void contract with an ultra vires contractwhich is merely voidable.

Ortega v. Leonardo

SALE; PAROL CONTRACT OF SALE OF REALTY UNENFORCEABLE ; DOC-

TRINE OF PART PERFORMANCE.While, as a general rule, an oral agreement

to sell a piece of land is not provable, however, where there is partial performance of

the sale contract, the principle excluding evidence of parol contracts for the sale of

realty will not apply.

2.ID.; CIRCUMSTANCES INDICATING PARTIAL, PERFORMANCE.Some

circumstances indicating partial performance of an oral contract of sale of realty are:

relinquishment of rights, continued possession, building of improvements, tender ofpayment rendition of services, payment of taxes, surveying of the land at the

vendee's expense, etc.

Carbonel v. Poncio

STATUTE OF FRAUDS; WHEN APPLICABLE; PART PERFORMANCE; ORAL

EVIDENCE ADMISSIBLE TO PROVE BOTH CONTRACT AND PART

PERFORMANCE.The Statute of Frauds is applicable only to executory contracts,

not to contracts that are totally or partially performed. The reason is simple. In

executory contracts there is a wide field for fraud because, unless they be in writing

there is no palpable evidence of the intention of the contracting parties. However, if a

contract has been totally or partially performed, the exclusion of parol evidence

would promote fraud or bad faith, for it would enable the defendant to keep the

benefits already derived by him from the transaction in litigation, and, at the same

time, evade the obligations, responsibilities or liabilities assumed or contracted by

him thereby. So that when the party concerned has pleaded partial performance, such

party is entitled to a reasonable chance to ,establish by parol evidence the truth of

this allegation, as well as the contract itself. "The recognition of the exceptional

effect of part performance in taking an oral contract out of the statute of frauds

involves the principle that oral evidence is admissible in such cases to prove both the

contract and the part performance of the contract" (49 Am. Jur. 927).

Babao v. Perez

STATUTE OF FRAUDS; CONTRACTS WHICH ARE NOT TO BE PERFORMEDWITHIN ONE YEAR; PARTIAL PERFORMANCE BY ONE PARTY, EFFECT

OF.Contracts which by their terms are not to be performed within one year may be

taken out of the Statute of Frauds through perf ormance by one party thereto. In

order, however, that a partial performance of the contract may take the case out of

the operation of the statute, it must appear clear that the full performance has been

made by one party within one year, as otherwise the statute would apply.

2.ID.; PAROL CONTRACT FOR THE SALE OF LAND; ENFORCEMENT OF

CONTRACT ON THE GROUND OF PART PERFORMANCE.Where the

contract is vague and ambiguous, the doctrine of part performance cannot be invokedto take the case out of the operation of the statute of frauds. Obviously, there can be

no part performance until there is a definite and complete agreement between the

parties. In order to warrant the specific enforcement of a parol contract for the sale of

land, on the ground of part performance, all the essential terms of the contract must

be established by competent proof, and shown to be definite, certain, clear and

unambiguous. (Cuyugan vs. Santos, 34 Phil., 100, 101.)

Cabague v. Auxilio

Evidence; Statute of Frauds; Mutual Promise to Marry.For breach of a mutual

promise to marry, the groom may sue the bride for damages, and evidence of such

mutual promise is admissible.

Yuvienco v. Dacuycuy

Same; Same; Statute of Frauds; Mere claim that petitioners have unjustifiably

refused to proceed with the sale of the property is unenforceable under the Statute of

Frauds in the absence of any note or memorandum and signed agreement of sale.

We hold that either way We view the situation, the conclusion is inescapable that the

claim of respondents that petitioners have unjustifiably refused to proceed with the

sale to them of the property in question is unenforceable under the Statute of Frauds.

It is nowhere alleged in said paragraphs 8 to 12 of the complaint that there is any

writing or memorandum, much less a duly signed agreement to the effect that the

price of P6,500,000 fixed by petitioners for the real property herein involved was

agreed to be paid not in cash but in installments as alleged by respondents.

Same; Same; Same; In any sale of real property on installments, the Statute of Frauds

read together with the perfection requirements of Article 1475 of the Civil Code

must be applied such that payment on installments of the sale must be in the requisite

note or memorandum.We hold that in any sale of real property on installments, the

Statute of Frauds read together with the perfection requirements of Article 1475 of

the Civil Code must be understood and applied in the sense that the idea of payment

on installments must be in the requisite of a note or memorandum therein

contemplated.

Same; Same; Same; Under the Statute of Frauds, the contents of a note or

memorandum is considered as the contract itself, except as to the form.To put itthe other way, under the Statute of Frauds, the contents of the note or memorandum,


11/16

whether in one writing or in separate ones merely indicative for an adequate

understanding of all the essential elements of the entire agreement, may be said to be

the contract itself, except as to the form.

Clarin v. Rulona

Same; Same; Same; Payment; Acceptance of payment, an indication of partys

consent to the contract; Statute of Frauds; Contract partially executed, not covered by

Statute of Frauds.Hence, it cannot be denied that there was a perfected contract of

sale between the parties and that such contract was already partially executed whenthe petitioner received the initial payment of P800.00. The latters acceptance of the

payment clearly showed his consent to the contract thereby precluding him from

rejecting its binding effect. (See Federation of United Namarco Distributors, Inc. v.

National Marketing Corporation, 4 SCRA 884). With the contract being partially

executed, the same is no longer covered by the requirements of the Statute of Frauds

in order to be enforceable. (See Khan v. Asuncion, 19 SCRA 996). Therefore, with

the contract being valid and enforceable, the petitioner cannot avoid his obligation by

interposing that Exhibit A is not a public document. On the contrary, under Article

1357 of the Civil Code, the petitioner can even be compelled by the respondent to

execute a public document to embody their valid and enforceable contract.

Bisaya Land Transportation v. SanchezSame; Same; Same; Status of contracts entered into without Court's approval.

What then is the status of the Contracts which Receiver Amor entered into with

Sanchez, without the approval of the court which appointed him receiver? Even the

petitioners noticeably waver as to the exact status of these Contracts. The petitioners

alleged in their Memorandum submitted to this Court that they are void contracts

under Article 1409(1) of the Civil Code, whereas, in their Petition, they labelled the

contracts as unenforceable under Article 1403(1) of the Civil Code. The

determination, therefore, of whether the questioned contracts are void or merely

unenforceable is important, because of the settled distinction that a void and

inexistent contract can not be ratified and become enforceable, whereas, an

unenforceable contract may still be ratified and, thereafter, enforced. The petitionersallege that the Contracts are void, citing Article 1409(1) of the Civil Code which

provides that contracts whose cause, object or purpose is contrary to law, morals,

good customs, public order or public policy, are inexistent and void from the

beginning. In the case at bar, the contracts of agency were entered into for the

management and operation of BISTRANCO's business in Butuan City. Said

Contracts necessarily imposed obligations and liabilities on the contracting parties,

thereby affecting the disposition of the assets and business of the company under

receivership. But a perusal of the Contracts in question would show that there is

nothing in their cause, object or purpose which renders them void. The purpose of

the Contracts was to create an agency for BISTRANCO with Marciano Sanchez as

its agent in Butuan City. Even as to the other provisions of the Contracts, there isnothing in their cause or object which can be said as contrary to law, morals, good

customs, public order or public policy so as to render them void. On the other hand,

paragraph 1, Article 1403 of the Civil Code provides that contracts "entered into in

the name of another person by one who has been given no authority or legal

representation, or who has acted beyond his powers" are unenforceable, unless they

are ratified. In the case at bar, it is undisputed that Atty. Adolfo Amor was entrusted,

as receiver, with the administration of BISTRANCO and its business. But the act of

entering into a contract is one which requires the authorization of the court which

appointed him receiver. Consequently, the questioned Contracts can rightfully be

classified as unenforceable for having been entered into by one who had actedbeyond his powers, due to Receiver Amor's failure to secure the court's approval of

said Contracts.

Same; Same; Same; Facts showing that the unenforceable contracts were

nevertheless deemed ratified in the case at bar.Private respondent Sanchez filed

his complaint in the lower court on 28 December 1979. But on 10 January 1980, co-

petitioner Benjamin G. Roa, as Executive Vice-President of BISTRANCO, still sent

Sanchez three (3) separate letters with the following contents: (1) reducing his

passage commission from 10%, as he used to receive in the previous years, to 7%

"as stated in the agency contract dated 27 July 1976;" (2) advising Sanchez that in

view of "his failure to post a bond or such other securities acceptable to the company

in the sum of P5,000.00 pursuant to par. 8 of the Contract executed by Sanchez the

plaintiff with BISTRANCO on 27 July 1976, we are recalling all unused passage

tickets issued your agency" and reminding him (Sanchez) also that "pursuant to par.

2 of aforementioned Contract, solicitation of cargo and passengers shall be

undertaken by you strictly in accordance with the scheduled rates of the Company";

and (3) informing Sanchez that "we (petitioners) are abiding strictly with the terms

of the contracts executed between Marciano C. Sanchez and Atty. Adolfo V. Amor

in behalf of BISTRANCO, etc. etc." The three (3) letters of Benjamin G. Roa in

effect recognized and gave efficacy to the Contracts in question. The declaration of

Benjamin G. Roa that BISTRANCO did not have any knowledge about the Contracts

before the complaint was filed on 28 December 1979 is contradicted by his own

testimony that, as early as 14 December 1979, he was already looking for the

contract, after he saw Exhibit "NN", wherein Sanchez requested the company "to

abide with the terms of the contract which will expire on July 1981". Besides, the

pretended lack of knowledge of Benjamin G. Roa can not be equated with

BISTRANCO's. It should be noted that Roa started to work for BISTRANCO only

on 27 April 1979, whereas, the Contracts were executed in 1976. The people who

were more in a position to know about the Contracts, like the company officers and

members of the board of directors at the time the Contracts were entered into,

especially Antonio V. Cuenco, were never presented as witnesses. Aside from this,

the company cannot deny its ratification of the Contracts even before the time of

Benjamin G. Roa, because when Atty. Fulveo Pelaez succeeded Atty. Adolfo Amor

as Receiver, he was represented by BISTRANCO's shipping manager as having


12/16

taken cognizance of these Contracts and sanctioned the acts of Sanchez as shipping

agent of BISTRANCO in Butuan City. This is shown by a letter, dated 15, February

1977, written by Capt. Federico Reyes, the shipping manager of BISTRANCO at

that time. The letter states that "the Receiver (Atty. Fulveo Pelaez) maintains that the

previous agency contract remains and (sic) basically the same except that the rates of

the agency commission were modified". Furthermore, it is clear that BISTRANCO

received material benefits from the contracts of agency of Sanchez, based upon the

monthly statements of income of BISTRANCO upon which the commissions of

Sanchez were based A perusal of the Contracts will also show that there is no singleprovision therein that can be said as prejudicial or not beneficial to BISTRANCO.

Hernandez v. CA

Civil Procedure: Statute of Frauds: Not every agreement affecting land must be put

in writing to attain enforceability.The respondents reliance on the Statute of

Frauds to secure a contrary judgment is misplaced. The Statute of Frauds finds no

application to this case. Not every agreement affecting land must be put in writing

to attain enforceability. Under the Statute of Frauds, Article 1403(2) (e) of the Civil

Code, such formality is only required of contracts involving leases for longer than

one year, or for the sale of real property or of an interest therein. Hernandezs

testimony is thus admissible to establish his agreement with Fr. Garcia as to the

boundary of their estates.

Rubias v. Batiller

Sales; Prohibition against purchase by lawyer of property in litigation from his

client; Article 1491, paragraph (5) of the Philippine Civil Code construed.Article

1491 of the Civil Code of the Philippines (like Article 1459 of the Spanish Civil

Code) prohibits in its six paragraphs certain persons, by reason of the relation of trust

or their peculiar control either directly or indirectly and "even at a public or judicial

auction," as follows: (1) guardians; (2) agents; (3) administrators; (4) public officers

and employees; (5) judicial officers and employees, prosecuting attorneys, and

lawyers; and (6) others specially disqualified by law.

Same; Prohibited purchase void and produces no legal effect.Castan's rationale for

his conclusion that fundamental considerations of public policy render void and

inexistent such expressly prohibited purchases (e.g. by public officers and employees

of government property intrusted to them and by justices, judges, fiscals and lawyers

of property and rights in litigation submitted to or handled by them, under Article

1491, paragraphs (4) and (5) of the Civil Code of the Philippines) has been adopted

in a new article of the Civil Code of the Philippines, viz, Article 1409 declaring such

prohibited contracts as "inexistent and void from the beginning."

Same; Nullity of such prohibited contracts cannot be cured by ratification.The

nullity of such prohibited contracts is definite and permanent and cannot be cured by

ratification. The public interest and public policy remain paramount and do notpermit of compromise or ratification.

Same; Nullity of such prohibited contracts differentiated from the nullity of contracts

of purchase by the guardians, agents and administrators.The permanent

disqualification of public and judicial officers and lawyers grounded on public policy

differs from the first three cases of guardians, agents and administrators (Article

1491, Civil Code), as to whose transactions, its has been opined, may be "ratified" by

means of and "in the form of a new contract, in which case its validity shall be

determined only by the circumstances at the time of execution of such new contract.

The causes of nullity which have ceased to exist cannot impair the validity of thenew contract. Thus, the object which was illegal at the time of the first contract, may

have already become lawful at the time of ratification or second contract; or the

service which was impossible may have become possible; or the intention which

could not be ascertained may have been clarified by the parties. The ratification or

second contract would then be valid from its execution; however, it does not retroact

to the date of the first contract.

Javier v. vda. De Cruz

Contracts; Nullity of; Lack of consent and consideration; Where circumstances

indicate that alleged vendor did not voluntarily affix his thumbmark on the deed of

sale and did not receive any consideration for said sale; Case at bar.Eusebio Cruz

could not talk, was very ill and was about to die when his thumbmark was affixed on

the deed of sale. Delfin Cruz did not have any means of livelihood. He was only the

houseboy of Eusebio Cruz. It is obvious that on January 17, 1941 Delfin Cruz could

not have raised the amount of P700.00 as consideration of the land supposedly sold

to him by Eusebio Cruz. Although the deed of sale purports to convey a parcel of

land with an area of only 26,577 square meters, defendants, as heirs of Delfin Cruz,

claim a much bigger land containing an area of 182,959 square meters assessed at

P4,310.00. The consideration of P700.00 is not only grossly inadequate but is

shocking to the conscience. No sane person would sell the land claimed by the

defendants for only about P40.00 per hectare. In view of the foregoing, this Court

finds that Eusebio Cruz did not voluntarily affix his thumbmark on the deed of sale

and did not receive any consideration for said sale.

Menil v. CA

Civil Law; Contracts of sale; Homesteads; Contract of sale of homestead within the

5-year prohibitory period is void and sale cannot be confirmed nor ratified.It

cannot be claimed that there are two contracts: One which is undisputably null and

void, and another, having been executed after the lapse of the 5-year prohibitory

period, which is valid. The second contract of sale executed on March 3, 1964 is

admittedly a Confirmatory deed of sale. Even the petitioners concede this point.

Inasmuch as the contract of sale executed on May 7, 1960 is void for it is expressly

prohibited or declared void by law [CA 141, Section 118], it therefore cannot be

confirmed nor ratified.


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Same; Same; Same; Simulated contracts; The second contract of sale for the same

homestead in favor of the same vendee for the same price is ample manifestations

that the second sale is simulated and that no object or consideration in the second

contract of sale has passed between the parties.Further, noteworthy is the fact that

the second contract of sale over the said homestead in favor of the same vendee,

petitioner Potenciano Menil, is for the same price of P415.00. Clearly, the unvarying

term of the said contract is ample manifestation that the same is simulated and that

no object or consideration passed between the parties to the contract. It is evident

from the whole record of the case that the homestead had long been in the possessionof the vendees upon the execution of the first contract of sale on May 7, 1960;

likewise, the amount of P415.00 had long been paid to Agueda Garan on that same

occasion. We find no evidence to the contrary.

Director of Lands v. Alba

Attorneys; Article 1491 of the New Civil Code prohibiting sale to lawyer of clients

estate involved in a litigation applies only while litigation is pending.This

contention is without merit. Article 1491 prohibits only the sale or assignment

between the lawyer and his client, of property which is the subject of litigation. As

WE have already stated: The prohibition in said article applies only to a sale or

assignment to the lawyer by his client of the property which is the subject of

litigation. In other words, for the prohibition to operate, the sale or assignment of the

property must take place during the pendency of the litigation involving the

property.

Same; An agreement for payment of 1/2 of real property in litigation to a lawyer as

attorneys fees in case the appeal prospers does not violate Art. 1491 of the New

Civil Code.In the instant case, the attorneys fees of Atty. Fernandez, consisting of

one half (1/2) of whatever Maximo Abarquez might recover from his share in the

lots in question, is contingent upon the success of the appeal. Hence, the payment of

the attorneys fees, that is, the transfer or assignment of one-half (1/2) of the property

in litigation will take place only if the appeal prospers. Therefore, the transfer

actually takes effect after the finality of a favorable judgment rendered on appeal andnot during the pendency of the litigation involving the property in question.

Consequently, the contract for a contingent fee is not covered by Article 1491.

Tongoy v. CA

Contracts; Nature of a simulated contract.The characteristic of simulation is the

fact that the apparent contract is not really desired nor intended to produce legal

effects nor in any way alter the juridical situation of the parties. Thus, where a

person, in order to place his property beyond the reach of his creditors, simulates a

transfer of it to another, he does not really intend to divest himself of his title and

control of the property; hence, the deed of transfer is but a sham. This characteristic

of simulation was defined by this Court in the case of Rodriguez vs. Rodriguez, No.

L-23002, July 31, 1967, 20 SCRA 908.

Same; Nature of a contract void ab initio.A void or inexistent contract is one

which has no force and effect from the very beginning, as if it had never been

entered into, and which cannot be validated either by time or by ratification (p. 592,

Civil Code of the Philippines, Vol. IV, Tolentino, 1973 Ed.).

Same; Same.A void contract produces no effect whatsoever either against or in

favor of anyone; hence, it does not create, modify or extinguish the juridical relation

to which it refers (p. 594, Tolentino, supra).

Same; Characteristics of a void ab initio contract.The following are the most

fundamental characteristics of void or inexistent contracts: 1) As a general rule, they

produce no legal effects whatsoever in accordance with the principle quod nullum

est nullum producit effectum. 2) They are not susceptible of ratification. 3) The

right to set up the defense of inexistence or absolute nullity cannot be waived or

renounced. 4) The action or defense for the declaration of their inexistence or

absolute nullity is imprescriptible. 5) The inexistence or absolute nullity of a contract

cannot be invoked by a person whose interests are not directly affected (p. 444,

Comments and Jurisprudence on Obligations and Contracts. Jurado, 1969 Ed.; italicssupplied).

Lita Enterprises v. IAC

Civil Law; Transportation; Contracts; Illegal Contracts; Kabit system, concept of;

Kabit system, contrary to public policy and void and inexistent; Court cannot

allow either of the parties to enforce an illegal contract but leaves them both where it

finds them.Unquestionably, the parties herein operated under an arrangement,

commonly known as the kabit system, whereby a person who has been granted a

certificate of convenience allows another person who owns motor vehicles to operate

under such franchise for a fee. A certificate of public convenience is a special

privilege conferred by the government. Abuse of this privilege by the grantees

thereof cannot be countenanced. The kabit system has been identified as one of theroot causes of the prevalence of graft and corruption in the government

transportation offices. In the words of Chief Justice Makalintal, this is a pernicious

system that cannot be too severely condemned. It constitutes an imposition upon the

good faith of the government. Although not outrightly penalized as a criminal

offense, the kabit system is invariably recognized as being contrary to public

policy and, therefore, void and inexistent under Article 1409 of the Civil Code. It is a

fundamental principle that the court will not aid either party to enforce an illegal

contract, but will leave them both where it finds them. Upon this premise, it was

flagrant error on the part of both the trial and appellate courts to have accorded the

parties relief from their predicament. Article 1412 of the Civil Code denies them

such aid.


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Same; Same; Same; Same; Same; Parties who entered into an illegal contract cannot

seek relief from the courts and each must bear the consequences of his acts.Ex

pacto illicito non oritur actio [No action arises out of an illicit bargain] is the time-

honored maxim that must be applied to the parties in the case at bar. Having entered

into an illegal contract, neither can seek relief from the courts, and each must bear

the consequences of his acts.

Same; Same; Same; Same; Defect of inexistence of contract permanent and

incurable.The defect of inexistence of a contract is permanent and incurable, andcannot be cured by ratification or by prescription. As this Court said in Eugenio v.

Perdido, the mere lapse of time cannot give efficacy to contracts that are null and

void.

In pari delicto rule, applicable in case at bar where parties entered into an illegal

contract like the Kabit system.

Arsenal v. IAC

Public Lands; Contracts; Sale; A sale of homestead land within the prohibited period

is void. A 3rd person affected by a void contract may set up its nullity.Being void,

the foregoing principles and rulings are applicable. Thus, it was erroneous for the

trial court to declare that the benefit of the prohibition in the Public Land Act doesnot inure to any third party. Such a sweeping declaration does not find support in

the law or in precedents. A third person who is directly affected by a void contract

may set up its nullity. In this case, it is precisely the petitioners interest in the

disputed land which is in question.

Same; Same; Same; A sale of homestead land within the prohibited period cannot be

confirmed or ratified later It remains void.As to whether or not the execution by

the respondents Palaos and Suralta of another instrument in 1973 cured the defects in

their previous contract, we reiterate the rule that an alienation or sale of a homestead

executed within the five-year prohibitory period is void and cannot be confirmed or

ratified. This Court has on several occasions ruled on the nature of a confirmatory

sale and the public policy which proscribes it.

Manotok Realty v. IAC

Civil Law; Sales; Sale of the paraphernal property of the deceased wife by the

husband who was neither an owner nor administrator of the property at the time of

sale is void ab initio; Sale which is void cannot be subject of ratification by the

company or the probate court.We are, therefore, led to the inevitable conclusion

that the sale between Don Vicente Legarda and the private respondent is void ab

initio, the former being neither an owner nor administrator of the subject property.

Such being the case, the sale cannot be the subject of the ratification by the

Philippine Trust Company or the probate court.

Portugal v. IAC

Civil Law; Contracts; Property; Sale; Where the contract of sale is vitiated by the

total absence of a valid cause or consideration, the contract is void or inexistent;

Deed of sale is void ab initio or inexistent not merely voidable.More than these,

the alleged contract of sale is vitiated by the total absence of a valid cause or

consideration. The petitioners in their complaint, assert that they, particularly

Cornelia, never knew of the existence of the questioned deed of sale. They claim that

they came to know of the supposed sale only after the private respondent, upon their

repeated entreaties to produce and return the owners duplicate copy of the transfer

certificate of title covering the two parcels of land, showed to them the controversialdeed. And their claim was immeasurablybolstered when the private respondents co

defendant below, his brother Emiliano

Doctrines Contracts

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