OBLICON Review QA - COB PDF
OBLICON Review QA - COB PDF
2. Q: In what instances may there not be a reformation of an instrument even though the requisites for
reformation are present?
A: Art. 1366
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3. Q: What is the test to determine whether a promise is within the Statute of Frauds?
A: This is under Art. 1403 – the Test of Guaranty. The question to ask is whether the promise is an
ORIGINAL or a COLLATERAL one. If it is original/independent, the promisor is primarily liable
and therefore it is NOT within the Statute of Frauds. If it is merely collateral to the agreement of
another, the promisor is merely a surety and thus, it must be in writing.
A: Art. 1370-1379
Article 1370. If the terms of a contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control.
If the words appear to be contrary to the evident intention of the parties, the latter shall prevail over
the former.
Article 1371. In order to judge the intention of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered.
Article 1372. However general the terms of a contract may be, they shall not be understood to
comprehend things that are distinct and cases that are different from those upon which the parties
intended to agree.
Article 1373. If some stipulation of any contract should admit of several meanings, it shall be
understood as bearing that import which is most adequate to render it effectual.
Article 1374. The various stipulations of a contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them taken jointly.
Article 1375. Words which may have different significations shall be understood in that which is most
in keeping with the nature and object of the contract.
Article 1376. The usage or custom of the place shall be borne in mind in the interpretation of the
ambiguities of a contract, and shall fill the omission of stipulations which are ordinarily established.
Article 1377. The interpretation of obscure words or stipulations in a contract shall not favor the
party who caused the obscurity.
Article 1378. When it is absolutely impossible to settle doubts by the rules established in the preceding
articles, and the doubts refer to incidental circumstances of a gratuitous contract, the least transmission
of rights and interests shall prevail. If the contract is onerous, the doubt shall be settled in favor of the
greatest reciprocity of interests.
If the doubts are cast upon the principal object of the contract in such a way that it cannot be known
what may have been the intention or will of the parties, the contract shall be null and void.
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Article 1379. The principles of interpretation stated in Rule 123 of the Rules of Court shall likewise
be observed in the construction of contracts.
A: Art. 1409
• Those whose cause, object or purpose is contrary to law, morals, good customs, public
order or public policy.
• Those which are absolutely simulated or fictitious.
• Those whose cause or object did not exist at the time of the transaction.
• Those whose object is outside the commerce of men.
• Those which contemplate an impossible service.
• Those where the intention of the parties relative to the principal object of the contract
cannot be ascertained.
• Those expressly prohibited or declared void by law.
6. Q: Enumerate the badges of fraud. What is the effect of the presence of a badge of Fraud?
Nota bene: I’m not sure what the answer is to the second question. This is my guess:
The existence of fraud, whether presumed or proved, does not necessarily make the alienation
rescissible. Fraud is only one of the requisites for the accion pauliana. If the transferee acquired the thing
in good faith and for valuable consideration even if the debtor who made the alienation act
fraudulently, rescission will not be allowed.
7. Q: What contracts are voidable or annullable? What is the effect of the plaintiff’s failure to prove
damages in an action to annul a contract?
A: Art. 1390
• Those where one of the parties is incapable of giving consent to a contract
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• Those where the consent is vitiated by mistake, violence, intimidation, undue influence
or fraud
Nota bene: I’m not sure what the answer is to the second question. But this is the only
part I saw about damages under annulment:
The general rule is that the annulment of the contract and the resulting mutual restitution
eliminates the possibility of damage suffered by the injured party. However, there are cases where
losses occasioned by the contract cannot be erased or compensated by its annulment. In such cases,
the injured party should be entitled to recover also indemnity for damages.
A: Under Title V.
• It is a relationship.
o Trustor
o Trustee
o Beneficiary
• It is a relationship of fiduciary character.
• It is a relationship with respect to property, not merely involving personal duties.
• It involves the existence of equitable duties imposed upon the holder of the title to the
property to deal with it for the benefit of another.
• It arises as a result of a manifestation of intention to create the relationship.
A: Art. 1397
The action for the annulment of contracts may be instituted by all who are thereby obliged principally
or subsidiarily. However, persons who are capable cannot allege the incapacity of those with whom
they contracted; nor can those who exerted intimidation, violence, or undue influence, or employed
fraud, or caused mistake base their action upon these flaws of the contract.
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11. Q: What contracts are rescissible?
A: Art. 1381
• Those which are entered into by guardians whenever the wards whom they represent suffer
lesion by more than one-fourth of the value of the things which are the object thereof;
• Those agreed upon in representation of absentees, if the latter suffer the lesion stated in the
preceding number;
• Those undertaken in fraud of creditors when the latter cannot in any other manner collect the
claims due them;
• Those which refer to things under litigation if they have been entered into by the defendant
without the knowledge and approval of the litigants or of competent judicial authority;
• All other contracts specially declared by law to be subject to rescission.
VOIDABLE VOID
• Valid until set aside • No contract, no effect!
• Can be set up only against a party • Can be set up by anyone who asserts a
thereto; can never be assailed by a third right arising from it; against all his
person successors not protected by law
• May be ratified • Cannot be ratified
• Prescribes • Does not prescribe
14. Q: In what instances where only one of the parties is mistaken may said party ask for the
reformation of the instrument?
A: Art. 1362
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If one party was mistaken and the other acted fraudulently or inequitably in such a way that the
instrument does not show their true intention, the former may ask for the reformation of the
instrument.
Art. 1363
When one party was mistaken and the other knew or believed that the instrument did not state their
real agreement, but concealed that fact from the former, the instrument may be reformed.
Lesion is the injury which one of the parties suffers by virtue of a contract which is
disadvantageous for him. To give rise to rescission, the lesion must be known or could have been
known at the time of the making of the contract, and NOT due to circumstances subsequent thereto
or unknown to the parties.
Art. 1381 paragraphs 1 and 2 provide when lesion may give rise to rescission:
(1) Those which are entered into by guardians whenever the wards whom they represent suffer
lesion by more than one-fourth of the value of the things which are the object thereof;
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated in
the preceding number;
16. Q: What are the elements of Estoppel in pais? In relation to the party sought to be estopped and
in relation to the party claiming estoppel.
• Lack of knowledge or of the means of knowledge of the truth as to the facts in question.
• Reliance, in good faith, upon the conduct or statements of the party to be estopped.
• Action or inaction based thereon of such character as to change the position or status of the
party claiming the estoppel, to his injury, detriment or prejudice.
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17. Q: What contracts are outside the scope of the Statute of Frauds?
SOF not applicable to contracts which are either totally or partially performed, on the theory
that there is a wide field for the commission of frauds in executory contracts which can only be
prevented by requiring them to be in writing, a fact which is reduced to a minimum in executed
contracts because the intention of the parties becomes apparent by their execution, and
execution concludes, in most cases, the rights of parties.
The three kinds of estoppel are Estoppel by Record, Estoppel by Deed and Estoppel in
pais. See table below for comparison.
A: Art. 1358
(1) Acts and contracts which have for their object the creation, transmission, modification or
extinguishment of real rights over immovable property; sales of real property or of an interest
therein are governed by articles 1403, No. 2, and 1405;
(2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal
partnership of gains;
(3) The power to administer property, or any other power which has for its object an act
appearing or which should appear in a public document, or should prejudice a third person;
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(4) The cession of actions or rights proceeding from an act appearing in a public document.
All other contracts where the amount involved exceeds five hundred pesos must appear in
writing, even a private one. But sales of goods, chattels or things in action are governed by
articles, 1403, No. 2 and 1405. (1280a)
ESTOPPEL WAIVER
• may arise even when there is no • a voluntary and intentional
intention on the part of the person abandonment or relinquishment of a
estopped to relinquish any existing right known right
• frequently carries the implication of • no implication of fraud
fraud
• involves conduct of both parties • involves act/conduct of only one of the
parties
ESTOPPEL RATIFICATION
• he is bound notwithstanding the fact • the party is bound because he intended
that there was no such intention, because to be (he gave his consent by virtue of
the other party will be prejudiced and the ratification)
defrauded by his conduct unless the law
treats him as legally bound
A: Innominate contracts are those without any particular name. The 4 classes are:
• Do ut des – I give you give
• Do ut facias – I give and you do
• Facio ut facias – I do and you do
• Facio ut des – I do and you give
22. Q: What are the requisites that must concur in order that an action for rescission of a contract may
prosper?
A: Requisites:
• The contract must be a rescissible contract, such as those mentioned in Articles 1381 and
1382.
• The party asking for rescission must have no other legal means to obtain reparation for the
damages suffered by him. (Art. 1383)
• The person demanding rescission must be able to return whatever he may be obliged to
restore if rescission is granted. (Art. 1385)
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• The things which are the object of the contract must NOT have passed legally to the
possession of a third person acting in good faith. (Art. 1385)
• The action for rescission must be brought within the prescriptive period of FOUR YEARS.
(Art. 1389)
24. Q: What is laches? What are its elements? How does it differ from prescription?
Laches is the failure or neglect, for an unreasonable and unexplained length of time, to
do that which by exercising due diligence, could or should have been done earlier; it is negligence
or omission to assert a right within a reasonable time, warranting a presumption that the party
entitled to assert it either has abandoned or declined to assert it.
Elements of Laches:
• Conduct on the part of the defendant, or of one under whom he claims, giving rise to the
situation complained of
• Delay in asserting complainant’s rights after he had knowledge of the defendant’s conduct
and after he has had an opportunity to sue
• Lack of knowledge or notice on the part of the defendant that the complainant would assert
the right on which he bases his suit
• Injury or Prejudice to the defendant in the event relief is accorded to complainant
LACHES PRESCRIPTION
• concerned with the effect of delay • concerned with the fact of delay
• principally a question of inequity of • a matter of time
permitting a claim to be enforced • statutory
• applies to equity • applies at law
• based on a fixed time
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25. Q: What contracts are unenforceable?
A: Art. 1403
(1) Those 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;
(2) Those that do not comply with the Statute of Frauds as set forth in this number. In the
following cases an agreement hereafter made shall be unenforceable by action, unless the same, or
some note or memorandum, thereof, be in writing, and subscribed by the party charged, or by his
agent; evidence, therefore, of the agreement cannot be received without the writing, or a secondary
evidence of its contents:
(a) An agreement that by its terms is not to be performed within a year from the making
thereof;
(b) A special promise to answer for the debt, default, or miscarriage of another;
(c) An agreement made in consideration of marriage, other than a mutual promise to marry;
(d) An agreement for the sale of goods, chattels or things in action, at a price not less than
five hundred pesos, unless the buyer accept and receive part of such goods and chattels, or
the evidences, or some of them, of such things in action or pay at the time some part of the
purchase money; but when a sale is made by auction and entry is made by the auctioneer in
his sales book, at the time of the sale, of the amount and kind of property sold, terms of sale,
price, names of the purchasers and person on whose account the sale is made, it is a sufficient
memorandum;
(e) An agreement for the leasing for a longer period than one year, or for the sale of real
property or of an interest therein;
(3) Those where both parties are incapable of giving consent to a contract.
A: Art. 1359
When, there having been a meeting of the minds of the parties to a contract, their true intention is not
expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud,
inequitable conduct or accident, one of the parties may ask for the reformation of the instrument to
the end that such true intention may be expressed.
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If mistake, fraud, inequitable conduct, or accident has prevented a meeting of the minds of the parties,
the proper remedy is not reformation of the instrument but annulment of the contract.
Requisites:
• There must have been a meeting of the minds upon the contract
• The instrument or document evidencing the contract does not express the true agreement
between the parties
• The failure of the instrument to express the agreement must be due to mistake, fraud,
inequitable conduct or accident
A: Art. 1441.
Trusts are either express or implied. Express trusts are created by the intention of the trustor or of the
parties. Implied trusts come into being by operation of law.
A: Art. 1346
An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice
a third person and is not intended for any purpose contrary to law, morals, good customs, public order
or public policy binds the parties to their real agreement.
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29. Q: What is the rescissory action to set aside contracts in fraud of creditors? What are its requisites?
(3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the
claims due them;
“Accion Pauliana”
Requisites:
• That the plaintiff asking for rescission has a credit prior to the alienation although
demandable later
• That the debtor has made a subsequent contract conveying patrimonial benefit to a third
person
• That the creditor has no other legal remedy to satisfy his claim, but would benefit by the
rescission of the conveyance to the third person
• That the act being impugned is fraudulent
• That the third person who received the property conveyed, if it is by onerous title, has been
an accomplice in the fraud
30. Q: When does an action for rescission prescribe? When is the prescriptive period reckoned from?
A: Art. 1389
For persons under guardianship and for absentees, the period of four years shall not begin until the
termination of the former's incapacity, or until the domicile of the latter is known.
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