Defendants still unable to pay so collection case. Defendants said P6K is usurious. Held: Under Article 1354 in regards to the agreement of the parties relative to the P6K 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 P6K obligation was illegal.P6K was liquidated damages so allowed unless proven illegal, which defendants did not do.
Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence.
Digests by 4A 2015
• The cause of a contract is the “why of the contract,” the immediate and most proximate purpose of the contract, the essential reason which impels the contracting parties to enter into it and which explains and justifies the creation of the obligation through such contract. • Causa or cause. Consideration is a bad translation. The cause is different from consideration.
Consideration in the Anglo-American sense must always be valuable or capable of pecuniary estimation. Cause, on the other hand, need not be material at all, and may consist in a moral satisfaction for the promissor.
• Causa is the immediate why, motive is the ultimate why. • Requisites of Cause
1. It must exist
2. It must be true/ real
§ Not simulated. 3. It must be licit
• Cause is different from motive. Cause is the proximate why while motive is the ultimate why. For example, A wants to sell his house for P60 M because A is moving to Canada. B is willing to buy the house for P60 M. In this case, the cause for A is the
P60 M while the cause for B is the house. A’s motive is to dispose of the house which he does not need since A is going to Canada.
• Like failure of or lack of object, the failure of cause has an effect on the contract. If there is no cause or the cause is illegal, then the contract is void. This is unlike the lack of consent. When consent is lacking, the contract is not void. The contract is merely voidable.
• General Rule: Failure of motive as a General Rule does not affect the contract. • Exception: Motive affects the contract when
1. The motive becomes a suspensive condition; or
o Balane will sell to Nitura his house for 20M on the condition that his visa to Canada is granted 2. The realization of the motive is the cause for the contract and there is an intervening serious
mistake of fact
o Contract will become voidable for mistake.
• In onerous contracts, the cause is the prestation or promise of a thing or service by the other party.
• It has been held that, as a mortgage is an accessory contract, its cause or consideration is the very cause or consideration of the principal contract, from which it receives its life, and without which it cannot exist as an independent contract (China Bank vs. Lichauco).
• In remuneratory contracts, the cause is the service or benefit which is remunerated .
• A remuneratory contract is one where a party gives something to another because of some service or benefit given or rendered by the latter to the former, where such service or benefit was not due as a legal obligation.
• In gratuitous contracts, the cause is the mere liberality of the benefactor. • Delivery – for real contracts
Digests by 4A 2015
b. Natural Elements
• The natural elements are those which are derived from the nature of the contract and ordinarily accompany the same. They are presumed by law, although they can be excluded by the
contracting parties if they so desire. i. Right to resolve (Article 1191) ii. Warranties in sales contracts
c. Accidental Elements
• The accidental elements are those which exist only when the parties expressly provide for them for the purpose of limiting or modifying the normal effects of the contract (i.e. conditions, terms, modes)
4. Stages of a Contract
a. Preparation, conception, or generation, which is the period of negotiation and bargaining, ending at the moment of agreement of the parties
b. Perfection or birth of the contract, which is the moment when the parties come to agree on the terms of the contract
• General Rule: Contracts are perfected by mere consent – the principle of consensuality (Article 1315)
• Exception: Real contracts, such as deposit, pledge, and commodatum are not perfected until the delivery of the object of the obligation (Article 1316)
c. Consummation or death, which is the fulfillment or performance of the terms agreed upon
5. Classification of Contracts a. According to Degree of Dependence
i. Preparatory
• A preparatory contract is one which has for its object the establishment of a condition in law which is necessary as a preliminary step towards the celebration of another subsequent contract (i.e. partnership, agency).
ii. Principal
• A principal contract is one which can subsist independently from other contracts and whose purpose can be fulfilled by themselves (i.e. sales, lease).
iii. Accessory
• An accessory contract is one which can exist only as a consequence of, or in relation with, another prior contract (i.e. pledge, mortgage).
b. According to Perfection
i. Consensual
Digests by 4A 2015
ii. Real
• A real contract is one which requires not only the consent of the parties for their perfection, but also the delivery of the object by 1 party to the other (i.e. commodatum, deposit, pledge).
c. According to their Form
i. Common or informal
• An informal contract is one which does not require some particular form (i.e. loan, lease). ii. Special or formal
• A formal contract is one which requires some particular form (i.e. donation, chattel mortgage).
d. According to Purpose
i. Transfer of ownership (i.e. sale) ii. Conveyance of use (i.e.commodatum) iii. Rendition of service (i.e. agency)
e. According to Subject Matter
i. Things (i.e. sale, deposit, pledge) ii. Services (i.e.agency, lease of services)
f. According to the Nature of the Obligation
i. Bilateral
• A bilateral contract is one which gives rise to reciprocal obligations for both parties (i.e. sale, lease).
ii. Unilateral
• A unilateral contract is one which gives rise to an obligation for only 1 of the parties (i.e. commodatum, gratuitous deposit).
• Can be cinelagmatic?
g. According to Cause
i. Onerous
• An onerous contract is one in which each of the parties aspires to procure for himself a benefit through the giving of an equivalent or compensation (i.e. sale).
ii. Gratuitous
• A gratuitous contract is one in which one of the parties proposes to give to the other a benefit without any equivalent or compensation (i.e. commodatum).
h. According to Risk
i. Commutative
• A commutative contract is one in which each of the parties acquires an equivalent of his prestation and such equivalent is pecuniarily appreciable and already determined from the moment of the celebration of the contract (i.e. lease).
Digests by 4A 2015
ii. Aleatory
• An aleatory contract is one in which each of the parties has to his account the acquisition of an equivalent prestation , but such equivalent, although pecuniarily appreciable, is not yet determined, at the moment of the celebration of the contract, since it depends upon the happening of an uncertain event, thus charging the parties with the risk of loss or gain (i.e. insurance).
i. According to Name
i. Nominate
• A nominate contract is one which has a name and is regulated by special provisions of law (i.e. sale, lease)
• We have 18.
ii. Innominate
Art. 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the provisions of Titles I and II of this Book, by the rules governing the most analogous nominate contracts, and by the customs of the place.
• An innominate contract is one that does not have a name and is not regulated by special provisions of law.
• A contract is not void just because it has no name. It is not a requisite for validity. A contract may have no name but it can be valid provided it has all the elements of a contract and all the
restrictions are respected.
• 4 Classes of Innominate Contracts o do ut des (“I give that you give”) o do ut facias (“I give that you do”) o facio ut des (“I do that you give”) o facio ut facias (“I do that you do”)
Corpus v. CA: Moreover, the payment of attorney’s fees to respondent David may also be justified by