OBLI CON REVIEWER FINAL EXAMS 1. What are the different defective contracts and what makes each of them defective? (a) Recissible Recissible - there is a sort of extrinsic defect consisting of an economic damage or lesion. The rescissible contract is valid until rescinded. (b) Voidable Voidable - The defect is more or less intrinsic, as in the case of vitiated consent. The voidable contract is valid till annulled. It can be annulled. It cannot be annulled, however, if there has been a ratification. (c) Unenforceable – – unenforceable contracts have no effect either because they are unauthorized, they fail to comply with the Statute of Frauds, or both parties are incapable of giving consent to the contract. The unenforceable contract cannot be sued upon or enforced, unless it is ratified. In a way, it may be considered as a validable transaction, that is, it has no effect now, but it may be effective upon ratification. (d) Void - The void contract is one that has no effect at all either because they are inexistent or illegal. It cannot be ratified or validated.
2. Define ‘Rescission’
Rescission is a process designated to render inefficacious a contract validly entered into and normally binding, by reason of external conditions, causing an economic prejudice to a party or to his creditors.
3. Enumerate the different recissible contracts (1) Those which are entered into by the 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 y more than one-fourth of the value of the things which are the object thereof; (3) Those undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them; (4) 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; (5) All other contracts specially declared by law to be subject to rescission.
4. What are the different badges of fraud (Oria v. Mcmicking) 1) The fact that the consideration of the conveyance is fictitious or inadequate; 2) A transfer made by a debtor after suit has been begun and while it is pending against him; 3) A sale upon credit by an insolvent debtor; 4) The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly embarrassed financially; 5) Evidence of large indebtedness or complete insolvency; 6) The fact that the transfer is made between father and son (when this fact is considered together with preceding circumstances); 7) The failure of the vendee to take exclusive possession of all the property.
5. Discuss the case of Abaya v. Enriquez. (Note: This case illustrates the principle that the presumption of fraud established in Art. 1387 does not apply to registered lands under the Torrens System IF the judgment or attachment made is not also registered.) FACTS: Enriquez owed Abaya a sum of money evidenced by a promissory note. Abaya obtained a judgment, and part payment was made by Enriquez, leaving the judgment partially unsatisfied. Subsequently, Enriquez sold two registered parcels of land to the spouses Artemio and Nera Jongco, complete strangers to them. The judgment in favor of Abaya and the writ of execution issued were never annotated at the back of the Transfer Certifi cate of Title to the land. Abaya assailed the validity of the alienation on the ground that same has been made in fraud of his rights, the transaction having been effected after a judgment and an attachment had been issued. Thus, he sued for the rescission of the sale. HELD: The rescission will not prosper, for the presumption established in Art. 1387 does not apply in this case for two reasons: Firstly, the spouses Jongco had no complicity at all in the fraud imputed to Enriquez; secondly, the encumbrance of the judgment and the attachment, not having been registered and annotated on the certificate, cannot prejudice an innocent purchaser for value of registered land. The Civil Code must yield to the Mortgage and to the Registration Laws, which are special laws.
6. What is the prescriptive period for an action to claim recission? For annulment? (1) For Rescission (a) General rule — 4 years from the date the contract was entered into. (b) Exceptions: 1) persons under guardianship — 4 years from termination of incapacity 2) absentees — 4 years from the time the domicile is known (2) For Annulment The action for annulment shall be brought within four years. This period shall begin: a) In cases of intimidation, violence or undue influence, from the time the defect of the consent ceases. b) In case of mistake or fraud, from the time of the discovery of the same. And when the action refers to contracts entered into by minors or other incapacitated persons, from the time the guardianship ceases.
7. Who may bring an action for recission? (a) The injured party (or the defrauded creditor). (b) His heir or successor-in-interest. successor-in-interest. (c) Creditors of the injured party or his heir or successor-in-interest by virtue of accion subrogatoria. 8. What are the 2 groups of voidable contracts? (1) Those where one of the parties is incapable of giving consent to a contract; (2) Those where the consent is vitiated by mistake, violence, intimidation, undue influence or fraud.
9. Distinguish recission and annulment.
RESCISSION (a) The basis here is lesion (damage). (b) The defect here is external or intrinsic. (c) The action is subsidiary. (d) This is a remedy. (e) Private interest governs. (f) Equity predominates. (g) Plaintiff may be a party or a third person. (h) There must be damage to the plaintiff. (i) If plaintiff is indemnified, rescission cannot prosper. (j) Compatible with the perfect validity of the contract. (k) To prevent rescission, ratification is not required.
A NNUL NN ULME ME NT (a) The basis here is vitiated consent or incapacity to consent. (b) The defect here is intrinsic (in the meeting of the minds). (c) The action is principal. is principal. (d) This is a sanction. (e) Public interest governs. (f) Law predominates. (g) Plaintiff must be a party to the contract (whether bound principally or subsidiarily). (h) Damage to the plaintiff is immaterial. (i) Indemnity here is no bar to the prosecution of the action. (j) Here, a defect is presupposed. (k) To prevent annulment, ratification is required.
10. What are the grounds for annulment? (a) incapacity to consent (b) vitiated consent 11. Effects of ratification of a voidable contract. (a) The action to annul is extinguished; thus, the contract becomes completely valid. (b) The contract is cleansed of its defect from the beginning. 12. Who may ask for annulment? The victim (principal or subsidiary party) may ask for annulment, not the guilty person or his successor. (Reason: He who comes to equity must come with clean hands.) 13. What are the effects of annulment? (a) If the contract has not yet been complied with, the parties are excused from their obligations. (b) If the contract has already been performed, there must be MUTUAL RESTITUTION (in general) of: 1) the thing, with fruits; 2) the price, with interest. 14. Query on squandering by insane person. An insane person sold his house, and squandered squandered the proceeds while insane. Can he ask for annulment later on and recover the house? Under the second paragraph of Art. 1401, he cannot sue for annulment and recover the house because the proceeds were squandered away by him. Thus, according to the Code Commission, the action cannot prosper, even if at the time of loss, the plaintiff was still insane or a minor. AND YET, this would contradict Art. 1399, because because there, the incapacitated incapacitated person is not obliged to make any restitution except insofar as he has been benefited by the thing or price received by him. Being insane, he could not have profited by squandering the money. It is thus believed that the answer of the Code Commission is NOT accurate for even were we to apply Art. 1401 (2 nd paragraph), it is clear that the loss during the insanity could not be due to “fraud” or “fault.”
15. What are the different kinds of unenforceable contracts? (a) Unauthorized contracts. (b) Those that fail to comply with the Statute of Frauds. (c) Those where both parties are incapable of giving consent to a contract. 16. What are agreements that must be reduced in writing? (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; (f) A representation as to the credit of a third person. (g) Express trust in real property 17. Enumerate the principles of Statute of Fraud. 1) The Statute of Frauds applies only to executor contracts (contracts where no performance has yet been made) and not partially or completely executed (consummated contracts). 2) The Statute of Frauds cannot apply if the action is neither for damages because of the violation of an agreement nor for the specific performance of said agreement. 3) The Statute of Frauds is exclusive; that is, it applies only to the agreement or contracts enumerated therein. 4) The defense of the Statute of Frauds may be waived. 5) The Statute of Frauds is a personal defense, that is, a contract infringing it cannot be assailed by third persons. 6) Contracts infringing the Statute of Frauds are not void; they are merely unenforceable. 7) The Statute of Frauds is a Rule of Exclusion. 8) The Statute of Frauds does not determine the credibility or weight of evidence. It merely concerns itself with the admissibility thereof. 9) The Statute of Frauds does not apply if it is claimed that the contract does not express the true agreement of the parties. 18. What is the purpose of the Statute of Frauds? The purpose of the Statute of Frauds is to prevent fraud, and not to encourage the same. Thus, certain agreements are required to be in writing so that they may be enforced. 19. How does the Statute of Fraud prevent fraud? Since memory is many times unreliable, oral agreements may sometimes result in injustice. To aid human memory, to prevent the commission of injustices due to faulty memory, to discourage intentional misrepresentations, are the principal aims of the Statute of Frauds. 20. How are contracts infringing the Statute of Fraud ratified? a) the failure to object to the presentation of oral evidence to prove the same; or b) by the acceptance of benefits under them.
21. What are the different void contracts? (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order, or public policy; (2) Those which are absolutely simulated or fictitious; (3) Those whose cause or object did not exist at the time of the transaction; (4) Those whose object is outside the commerce of men; (5) Those which contemplate an impossible service; (6) Those where the intention of the parties relative to the principal object of the contract cannot be ascertained; (7) Those expressly prohibited or declared void by law. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. 22. Void v. Voidable.
VOIDABLE
VOID
(a) may be ratified
(a) cannot be ratified
(b) produces effects 'til annulled
(b) generally, effects are not produced at all
(c) defect is due to incapacity or vitiated consent
(c) the defect here is that ordinarily, public policy is militated against
(d) valid 'til annulled
(d) void from the very beginning so generally, no action is required to set it aside, unless the contract has already been performed
(e) may be cured by prescription
(e) cannot be cured by prescription
(f) defense may be invoked only by the parties (those principally or subsidiarily liable), or their successors in interest and privies
(f) defense may be availed of by anybody, whether he is a party to the contract or not, as long as his interest is directly affected.
(g) referred to as relative or conditional nullity
(g) referred to as absolute nullity
23. Are simulated contracts valid or not? (a) If absolutely simulated, the contract is void for utter lack of consent. (b) If relatively simulated, the hidden or intended contract is generally binding unless prejudice
is caused to a third person or if it is contrary to law, morals, customs, public policy, or public publi c order . 24. Different characteristics of a void contract. (a) The right to set up the defense of illegality cannot be waived, and may be considered on appeal even if not raised in the trial court. (b) The action or defense for their declaration as inexistent does not prescribe. (c) The defense of illegality of contracts is not available to third persons whose interests are not directly affected. (d) Cannot give rise to a contract; thus “a contract which is the direct result of a previous illegal contract is also void and inex istent.” (e) Generally produces no effect. (f) Generally, no action to declare them void is needed, since they are inexistent from the very beginning. (g) They cannot be ratified. 25. Is a sale of conjugal properties valid? The sale of conjugal properties cannot be made by the surviving spouse without the formalities established for the sale of property of deceased persons, and such sale is VOID as to the share of the deceased spouse.
26. Distinguish civil and natural obligations. Civil obligations give a right of action to compel their performance. Natural obligations, not being based on positive law but on equity and natural law, do not grant a right of action to enforce their performance, but after voluntary fulfillment by the obligor, they authorize the retention of what has been delivered or rendered by reason thereof. Some natural obligations are set forth in the following articles. 27. Undue payment v. natural obligation. If a person pays a debt that has prescribed — (a) not knowing it has prescribed, he can recover on the ground of undue payment. (b) knowing it has prescribed, he cannot recover for this would be a case of a natural obligation. 28. Concept of estoppel. Speaking generally, it may be said that estoppel is a bar which precluded a person from denying or asserting anything contrary to that which has been, in contemplation of law, established as the truth either by acts of judicial or legislative officers, or by his own deed or representation either express or implied. 29. Origin of estoppel. The doctrine of estoppel has its origin in equity, and is based on moral rights and natural justice. Its applicability applicability to any particular case depends depends to a very large extent upon the special circumstances of the case. 30. What are the kinds of estoppel? a) estoppel IN PAIS (equitable estoppel); this may be estoppel: 1) by conduct or by acceptance of benefits, 2) by representation or concealment, 3) by silence, 4) by omission, 5) by laches (unreasonable delay in suing). (b) estoppel BY DEED (technical estoppel); this may be: 1) estoppel by deed proper 2) estoppel by judgment as a court record 31. What are the different doctrines in estoppel? In estoppel in pais: 1) Conduct because of ignorance or mistake does not result in estoppel. 2) Estoppel by laches bars an action to create a vested right but does not bar an action to protect a vested right. 3) Just because a person is silent does not necessarily mean that he will be in estoppel. There should have been a duty or obligation to speak. 4) A mere promise to perform or to omit at some future time does not necessarily result in estoppel. For this to exist, the promise must have been relied upon, and prejudice would result unless estoppel is applied. In estoppel by deed: 1) If the deed or instrument is null and void because the contract, let us say, is illegal, there is NO estoppel. 2) Ordinarily, the person estopped must be capacitated. But if a minor is clever enough to deceive others, estoppel may result. 3) If a person notarizes (and is not a party to) the instrument, he is NOT in estoppel.
32. Define trust and give its characteristics. characteristics. Trust is the right to the beneficial enjoyment of property, the legal title to which is vested in another. It is a fiduciary relationship concerning property which obliges the person holding it to deal with the property for the benefit of another. The person holding, in view of his equitable title, is allowed to exercise certain powers belonging to the owner of the legal title. The Characteristics of a ‘Trust’ are: are: (a) It is a fiduciary relationship. (b) Created by law or by agreement. (c) Where the legal title is held by one, and the equitable title or beneficial title is held by another. 33. Who are the parties to a trust? (a) trustor or settler — he establishes the trust (b) trustee — holds the property in trust for the benefit of another (c) beneficiary or cestui que trust — the person for whose benefit the trust has been created 34. Classifications of trusts? (a) Express trust — created by the parties, or by the intention of the trustor. (b) Implied trust — created by operation of law. There are two kinds of implied trusts: 1) Resulting trust (also called bare or passive trust) — Here, there is an intent to create a trust but it is not effective as an express trust. 2) Constructive trust — Here, no intention to create a trust is present, but a trust is nevertheless created by law to prevent unjust enrichment or oppression. 35. Is trust over personal property valid and enforceable? Yes, trust over personal property is valid and enforceable. The law says that “no express trusts concerning an immovable or any interest therein may be proved by parol (oral) evidence.” Thus by implication, for a trust over personal property an oral agreement is valid and enforceable between the parties. 36. How is an express trust created? (a) By conveyance to the trustee by an act inter vivos or mortis causa (as in a will). (b) By admission of the trustee that he holds the property, only as trustee. 37. Is acceptance by beneficiary necessary? When is it presumed? For the trust to be effective, the beneficiary must accept either expressly, impliedly, or presumably. If the granting of benefit is purely gratuitous, the acceptance by the beneficiary is presumed unless there is proof that he really did not accept. 38. How are trusts ended? (a) Mutual agreement by all the parties (b) Expiration of the term (c) Fulfillment of the resolutory condition (d) Rescission or annulment (e) Loss of subject matter of the trust (f) Order of the court (g) Merger (h) Accomplishment of the purpose of the trust
39. Do trusts prescribe? (Ramos v. Ramos) (1) Express trusts do not prescribe. This means that the beneficiary or cestui que trust can recover the property anytime unless there has been repudiation of the same. (2) With respect to implied trusts, a distinction must be made: (a) resulting trusts generally also do not prescribe. However, recovery from the trustee may prescribe if the trustee has expressly repudiated the trust; (b) constructive trusts do prescribe, and this rule is well-settled. 40. Oral evidence for trusts. While an implied trust may be proved by oral evidence, still, said evidence must be a trustworthy oral evidence, for oral evidence may be easily fabricated.
