A document titled "Joint Affidavit of Undertaking" which contains clear promissory stipulations to perform an obligation (e.g., replace a damaged item or pay its value by a certain date) constitutes a binding contract if the essential elements of consent, object, and cause are present, irrespective of its title. Interest on a monetary obligation arising from such a contract, where the contract stipulates a payment deadline but is silent on when interest for delay begins, accrues only from the date of judicial or extrajudicial demand, not automatically from the payment deadline. Furthermore, courts may equitably reduce stipulated interest rates that are found to be excessive or unconscionable.

The dispute originated from a vehicular accident on October 24, 1999, where a minibus owned by petitioner Rodolfo G. Cruz and driven by Arturo Davin collided with the Toyota Corolla car belonging to respondent Atty. Delfin Gruspe, causing Gruspe's car to be a total wreck. This incident led to Cruz and Leonardo Q. Ibias executing a Joint Affidavit of Undertaking the following day to compensate Gruspe.

• On October 24, 1999, a minibus owned by petitioner Rodolfo G. Cruz and driven by Arturo Davin collided with the Toyota Corolla car of respondent Atty. Delfin Gruspe, rendering Gruspe's car a total wreck.
• On October 25, 1999, Cruz, accompanied by Leonardo Q. Ibias (a barangay official), went to Gruspe's office, apologized, and executed a "Joint Affidavit of Undertaking."
• The Joint Affidavit of Undertaking stipulated that Cruz and Leonardo Ibias would jointly and severally replace Gruspe's damaged car with one of the same model and quality within 20 days (by November 15, 1999), or alternatively, pay Gruspe the car's cost of P350,000.00, with an interest of 12% per month for any delayed payment after November 15, 1999.
• Cruz and Leonardo Ibias failed to comply with their undertaking by the November 15, 1999 deadline.
• On November 19, 1999, Gruspe filed a complaint for collection of sum of money against Cruz and Leonardo Ibias before the RTC.
• During the pendency of the case, Leonardo Ibias died and was substituted by his widow, petitioner Esperanza Ibias.
• Gruspe subsequently sold the wrecked car for P130,000.00, reducing the principal claim to P220,000.00 (P350,000.00 - P130,000.00).

• The Joint Affidavit of Undertaking is not a contract that can be the basis of an obligation to pay a sum of money, as an affidavit's purpose is merely to attest to facts, unlike a contract which requires a meeting of minds.
• Even if considered a contract, the Joint Affidavit of Undertaking is invalid because their consent was vitiated; Gruspe, a lawyer, prepared it and its contents were never explained to them, and they were forced to sign it for Cruz's minibus to be released, as it was his only means of income.
• Gruspe did not make any demand upon them prior to filing the complaint for sum of money, therefore, pursuant to Article 1169 of the Civil Code, they could not be considered in default and Gruspe could not yet take any action.

• The Joint Affidavit of Undertaking was a binding agreement where petitioners voluntarily assumed the obligation to compensate for the damage caused to his car.
• Petitioners failed to comply with the terms of the Joint Affidavit of Undertaking, specifically their promise to either replace the car or pay its value by the agreed deadline.
• (Implicitly, by filing the complaint) Petitioners were liable for the principal amount plus the stipulated interest due to their non-compliance.

• Whether the Joint Affidavit of Undertaking executed by petitioners is a valid and enforceable contract.
• Whether the consent of petitioners to the Joint Affidavit of Undertaking was vitiated.
• Whether petitioners were in default despite the alleged absence of a prior demand from respondent before the filing of the complaint.
• Whether the interest rate stipulated in the Joint Affidavit of Undertaking and as modified by the lower courts is proper and from when such interest should accrue.

• The Supreme Court found the petition partly meritorious and affirmed the CA decision with modification.
• The Joint Affidavit of Undertaking is a valid and enforceable contract because it contains stipulations characteristic of a contract, including a promise to replace the damaged car or pay its value, reflecting the parties' intention to be bound, regardless of its title. The terms were simple and easily understandable.
• Petitioners failed to prove by a preponderance of evidence that their consent was vitiated. The allegation that they were forced to sign for the release of the minibus or that the terms were onerous does not, by itself, equate to vitiated consent. They admitted the genuineness and due execution of the document.
• Demand is necessary for a debtor to be in default. As there was no finding of extrajudicial demand prior to the filing of the complaint, demand was considered made only upon the judicial demand, i.e., the filing of the complaint on November 19, 1999. Therefore, interest on the amount due should be computed from this date, not from November 15, 1999.
• The Court affirmed the CA's change of the interest rate from 12% per month (as stipulated in the affidavit) to 12% per annum, deeming the 12% per month rate excessive and unconscionable. The P220,000.00 principal obligation shall earn interest at 12% per annum from November 19, 1999, until fully paid.

• Nature of Contracts (Form and Intention) — Contracts are obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present. In interpreting a document, the parties' evident intention prevails over the literal meaning of its terms or its denomination; the Court looks beyond the title to determine its true nature. This was applied to classify the "Joint Affidavit of Undertaking" as a binding contract because its contents clearly showed an intent by Cruz and Leonardo Ibias to assume specific obligations towards Gruspe.
• Vitiated Consent (Burden of Proof) — An allegation that consent to a contract was vitiated (e.g., by force or fraud) must be proven by a preponderance of evidence by the party making the allegation. Applied here, the petitioners failed to discharge this burden, as their claims of being forced to sign for vehicle release or not understanding the simple terms were insufficient to invalidate their consent to the Joint Affidavit of Undertaking.
• Default / Mora Solvendi (Necessity of Demand) — Under Article 1169 of the Civil Code, a debtor incurs in delay (default) from the time the obligee judicially or extrajudicially demands fulfillment of the obligation, unless demand is not necessary under specific exceptions (which were not present here). This doctrine was applied to rule that interest on the unpaid sum should accrue only from the date of judicial demand (filing of the complaint on November 19, 1999), as no prior extrajudicial demand was proven.
• Equitable Reduction of Interest Rates — Courts have the authority to equitably reduce interest rates stipulated by parties if such rates are found to be iniquitous, unconscionable, or excessive. This was applied to affirm the reduction of the stipulated interest rate of 12% per month in the Joint Affidavit of Undertaking to a more reasonable 12% per annum.

• "Contracts are obligatory no matter what their forms may be, whenever the essential requisites for their validity are present. In determining whether a document is an affidavit or a contract, the Court looks beyond the title of the document, since the denomination or title given by the parties in their document is not conclusive of the nature of its contents."
• "An allegation of vitiated consent must be proven by preponderance of evidence; Cruz and Leonardo failed to support their allegation."
• "Default generally begins from the moment the creditor demands the performance of the obligation. In this case, demand could be considered to have been made upon the filing of the complaint on November 19, 1999, and it is only from this date that the interest should be computed."

• Tayco v. Heirs of Concepcion Tayco-Flores — Cited to support the principle that the denomination or title given by parties to their document is not conclusive of the nature of its contents, reinforcing the Court's approach to analyze the substance of the "Joint Affidavit of Undertaking."
• Ayala Life Assurance, Inc. v. Ray Burton Dev't. Corp. — Referenced for the rule in contract interpretation that the intention of the parties is primordial and if the terms are clear, their literal meaning shall control, unless words appear contrary to evident intention, in which case the latter prevails.
• Social Security System v. Moonwalk Development and Housing Corporation — Cited to enumerate the requisites for a debtor to be considered in default, particularly the necessity of judicial or extrajudicial demand by the creditor.
• Asian Cathay Finance and Leasing Corporation v. Spouses Gravador — Referenced in relation to the Court's power to reduce excessive, iniquitous, or unconscionable interest rates, justifying the affirmation of the reduction of the 12% per month interest to 12% per annum.

• Civil Code, Article 1318 — Referenced by the CA (and implicitly by SC) as providing the essential elements of a contract (consent, object certain, and cause), which were found to be present in the Joint Affidavit of Undertaking.
• Civil Code, Article 1169 — Directly cited and applied by the Supreme Court to determine when petitioners incurred in delay. The article states that those obliged to deliver or do something incur in delay from the time the obligee judicially or extrajudicially demands fulfillment, subject to certain exceptions not applicable in this case. This was the basis for ruling that interest should accrue from the date of judicial demand.