CHAPTER 2 - ESSENTIAL ELEMENTS OF A CONTRACT (ART. 1318 - 1355)

Question 1

There is no contract unless the following requisites concur:

Answer 1

(1) Consent of the contracting parties
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established. (1261)

Question 2

Is the manifestation of the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.

Answer 2

Consent

Question 3

A proposal to enter into a contract.

Answer 3

Offer

Question 4

Is the net of agreeing either expressly or by conduct to the offer of another so that a contract is concluded and the parties become legally bound.

Answer 4

Acceptance

Question 5

Must be certain, it must not be a mere joke, it should be seriously intended and must be definite.

Answer 5

Offer

Question 6

It is absolute, it must be unqualified and accepted it without condition.

Answer 6

Acceptance

Question 7

Rejection of the original offer, offering another other than the original offer (there is no meeting of minds)

Answer 7

Counter offer

Extinguished the original offer
It may or may not be accepted by the original offerer

Note: Qualified acceptance constitute a counter offer

Question 8

If P offer to sell his car to G for 1M. While G didn’t give her consent yet, P withdraw the offer. Was P allowed to do so?

Answer 8

Yes, because there is no perfection of contract, there is still no consent.

Question 9

G offer to buy the car of P for 800,000. However, P said if it can be 1M. G then about to leave when P said that he is willing to sell his car for 800,000. Can G not buy the car? Is the contract perfected?

Answer 9

Yes, there is no acceptance so it is still absolute, a qualified acceptance

Question 10

What are the requisites of consent?

Answer 10

1. There must be two or more parties
2. The parties must be capable or capacitated
3. There must be no vitiation of consent
4. There must be no conflict between what was expressly declared and what was really intended
5. Intent must be declared properly

Question 11

On Dec 1, P offer to sell his car for 1M by letter. On Dec 5, G accepted the offer and agree to buy the car. On Dec 10, G sent a letter accepting the offer of P. Before accepting the letter, P died. Is the contract perfected?

Answer 11

There is no perfection of contract, it will only bind if P have received and known the letter sent by G, however he died before receiving it.

Question 12

On Dec 1, P offer a lease on his house. On Dec 15, G sent a letter accepting the offer of P. However on morning at also Dec 15, P sent a letter to G withdrawing the offer. The letter of acceptance was received by P on Dec 16. Was there a contract?

Answer 12

• There is no contract, prior to the receipt of the letter of the acceptance, the offer had already been withdrawn.

Question 13

On Dec 1, P offer a lease on his house. On Dec 15, G sent a letter accepting the offer of P. However on morning at also Dec 15, P sent a letter to G withdrawing the offer. The letter of acceptance was received by P on Dec 16. Was there a contract?

Answer 13

There is no contract, prior to the receipt of the letter of the acceptance, the offer had already been withdrawn.

Question 14

An acceptance may be express or implied.

True or False?

Answer 14

True

Question 15

The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with.

True or False?

Answer 15

True

Question 16

Are extension of the personality of his principal

Answer 16

Agent

Question 17

P said to B (the agent) to offer to sell his car for 1M. B (an agent) offer to sell the car for 1M to G. G can then communicate her acceptance to B. When the principal offerer (P) is the one who made directly an offer to G, is G allowed to give her acceptance to B?

Answer 17

No

Question 18

An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed.

True or False?

Answer 18

True

Question 19

This is an accessory penalty

Answer 19

Civil interdiction

Question 20

On Nov 1, P offer to sell his house for 1M. P then sent a letter to G giving her 10 days to decide/accept (option contract). Suppose on Nov 5, P withdraw his offer to sell his house to G. Can P validly do so?

Answer 20

Yes, he can withdraw the contract as long as it is communicated. (General rule)

Question 21

On Nov 1, P offer to sell his house for 1M. P then sent a letter to G giving her 10 days to decide/accept (option contract). Suppose on Nov 5, P withdraw his offer to sell his house to G. However, when G already have 1,000 to P before P withdraw the offer. Can P still withdraw the offer?

Answer 21

No, because the offer was founded in consideration (Exception to the general rule)

Question 22

When offerer gave the offeree a period or days to accept the offeree

Answer 22

Option Contract

Question 23

It is the money paid or promised for the option

Answer 23

Option Money

Question 24

For Sale: 100 Square meter lot with 2-storey house located at 123, ABC St. Malate, Manila for 10,000,000 cash.

Answer 24

Definite Offer

Question 25

For Sale: 100 Square meter lot, at 10 million to 20 million lot at 123, ABC St. Malate, Manila.

Answer 25

Mere Invitation

Question 26

Are binding and valid unless they are annulled in court

Answer 26

Voidable contracts

Question 27

What are characteristic of a consent

Answer 27

1. Consent must be intelligently given
2. Consent must be free and voluntary
3. Consent must be conscious or spontaneous

Question 28

What are the grounds for vitiated consents?

Answer 28

Mistake, Violence, Intimidation, Undue Influence, Fraud

Question 29

Is the erroneous belief regarding the material facts of a contract at the time it was entered into.

Answer 29

Mistake

Question 30

When does error or mistake vitiates consent?

Answer 30

Substance of the thing

Object of the contract
Conditions which have principally moved one or both parties to enter into the contract
Identity or qualifications of one of the parties

Question 31

When mistake will invalidate consent?

Answer 31

a) If the mistake refers to the substance of the thing which is the object of the contract.

b) If the mistake refers to those conditions which have principally moved one or both parties to enter into the contract.

c) If the mistake refers to the identity or qualifications of one of the parties if such identity or qualifications have been the principal cause of the contract.

d) If the mistake refers to the legal effect of an agreement when the real purpose of the parties is frustrated and the same is mutual.

Question 32

P and G entered into a contract that P should deliver 32k of gold necklace to G. Upon delivery, it turn out to be 16k of gold only. Can G annulled the contract?

Answer 32

Yes, If G only knew that P will only deliver 16k gold, G will not enter into the contract.

Question 33

S sold his car to B for 100,000 cash because he needed the money to settle a debt. The deed of sale signed by him showed, however, that the price would be paid in 4 equal installments. Can S annulled the contract?

Answer 33

Yes, S can have the sale annulled because of a mistake as to the condition of the contract.

Question 34

P deliver to G a car, thinking that G will pay when she will have money, G agrees in the belief that it is donated to him by P. What type of defective contract is this?

Answer 34

Voidable contract

Question 35

D donated a lot to C believing that C was his illegitimate son. D found out later, however, that C was not his son, but that of his brother. Can C annulled the contract?

Answer 35

Yes, the identity of C was material to the contract; hence, D can have the contract annulled on the ground of mistake as to the identity of the donee.

Question 36

P, the principal of a high school, appointed T, to teach Mathematics in the school believing that the latter was a graduate of Mathematics. Later, P learned that T was not a graduate of Mathematics, but of Music. Can P annulled the contract?

Answer 36

Yes, P, here, can have the employment contract set aside on the ground of mistake qualification.

Question 37

When does mistake not vitiate consent?

Answer 37

a) If the mistake refers to a simple mistake of account which shall only be corrected.

b) If the party alleging it knew the doubt, contingency or risk affecting the object of the contract

Question 38

If 10 copies of a book were sold at P567.80 each but the total price was shown at P5,876.00 instead of P5,678.00. Is the contract voidable?

Answer 38

NO, the mistake in computation will not render the contract voidable but will only be corrected.

Question 39

If one party is unable to read or does not understand the language of the contract and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.

True or False?

Answer 39

True

Question 40

If P is blind and sign a contract believing it is a contract of mortgage, but is really a deed of sale in relative in the person of G. If P claims fraud or mistake, who has the burden?

Answer 40

G has the burden of proving compliance with Art. 1332

When G cannot prove that she did not take advantage, deed of sale can be annulled

Question 41

B buys a brand-new car stereo for 500.00 when he knows that the price of one is 5,000, he cannot allege mistake if the car stereo later turns out to have been stolen. Can the contract be annulled?

Answer 41

No, The fact that the car stereo was offered to him at a very low price should have put him on guard that it might have come from an illegal source.

Question 42

What are the requisites of a mutual error?

Answer 42

Mutual error
Legal effect of an agreement
Real purpose of the parties is frustrated

Question 43

P and G intended to enter into a contract of mortgage, but executed a document for a contract of sale believing that both has the same legal effects. Can the contract be annulled?

Answer 43

Yes, Here, the real purpose of the parties is frustrated. Therefore, their remedy is annullment.

Question 44

S and B entered into a contract of sale with a right to repurchase believing that the contract had the same effect as a contract of loan and mortgage. The mistake here refers to the legal effect of their agreement.
Is the contract voidable?

Answer 44

Yes, either party may annul the contract on such ground.

Question 45

More on physical coercion

Answer 45

Violence

Question 46

More on moral or mental coercion

Answer 46

Intimidation

Question 47

When in order to wrest consent, serious or irresistible force is employed.

Answer 47

Violence

Question 48

S signed a deed of sale of his land to B because B twisted and threatened to break his arm if he refused to sign. What ground of mistake is this?

Answer 48

Consent here is given because of violence.

Question 49

What are the requisites for violence to vitiate consent?

Answer 49

1. Employment of serious or irresistible force
2. It must be the reason why the contract was entered into

Question 50

When one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person or property, or upon the person or property of his spouse, descendants or ascendants to give his consent.

Answer 50

Intimidation

Question 51

In the example in (b) above, if signed the deed of sale because B pointed a gun on his head and threatened to shoot him if he did not sign the deed of sale, consent here is
now what grounds for vitiated consent?

Answer 51

Intimidation. There is likewise intimidation if B threatened to burn the house of S, or shoot S’s spouse, parent or child, if S did not sign the deed of sale

Question 52

What are the requisites for Intimidation to vitiate consent?

Answer 52

1. Reasonable and well-grounded fear
2. Of an imminent and grave evil
3. Upon his person, property, or upon the person or property of his spouse descendants or ascendants
4. It must be the reason why the contract was entered into
5. The threat must be of unjust act, an actionable wrong

Question 53

What are the factors to be considered in determining the degree of intimidation?

Answer 53

a) age,
b) sex, and
c) condition of the person

Question 54

No intimidation exists in case of a threat to enforce one’s claim through competent authority, if the claim is just or legal.

True or False?

Answer 54

True

Question 55

C threatened to sue D if he did not pay to the former his debt representing unpaid construction supplies that he had purchased D, afraid of a court action, thus made a dacion en pago by transferring his lot to C to settle his debt. Is the contract still voidable?

Answer 55

Here, the contract (dacion en pago) is not voidable as there is no intimidation when one seeks the aid of the courts (the competent authority, in this case) to enforce his legal or just claim, a legitimate collectible.

Question 56

Violence or intimidation shall annul the obligation, although it may have been employed by a third person who did not take part in the contract.

True or False?

Answer 56

True

Question 57

When a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice.

Answer 57

undue influence

Question 58

If a church minister improperly takes advantage of his power over a member of his congregation who regularly confides in him by persistently telling the member to sell his property to him. Is the contract voidable?

Answer 58

Yes, the contract if entered into will be voidable at the instance of the member on the ground of undue influence.

Question 59

Factors to be considered in determining the existence of undue influence:

Answer 59

a) Confidential, family, spiritual and other relations of the parties (such as that between a physician and his patient or a lawyer and his client),
b) Mental weakness;
c) Ignorance; or
d) Financial distress of the person alleged to have been unduly influenced.

Question 60

When, through the insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.

Answer 60

Causal fraud or dolo causante

Question 61

S induced B to buy a ring which S claimed was made of pure gold However, S knew all along that the ring was only gold-plated. Can be annulled the contract?

Answer 61

Yes, B can have the contract annulled on the ground of causal fraud or dolo causante.

Question 62

Requisites for Dolo Causante?

Answer 62

1. The fraud must be material and serious
2. The fraud must be employed by only one party
3. Deliberate intent to deceived
4. The other party must have rely on that untrue statement, and must not be negligent

Question 63

A and B were partners in a real estate business. During the existence of the partnership, A met X who told A that he was interested in buying a large tract of land. A did not inform B about X’s proposal. Instead, he persuaded B to sell his share in the partnership to him. After A became the sole owner of the business, he sold real property to X realizing a huge profit. iCan B annull the contract?

Answer 63

The contract between A and B for the sale of B’s interest is voidable on the ground of fraud. A was duty bound to disclose the proposal of X to B since as partners, they are bound by trust and confidence.

Question 64

When no fraud exists

Answer 64

a) In case of the usual exaggerations in trade, when the other party had an opportunity to know the facts.

b) In case of a mere expression of an opinion, unless made by an expert and the other party has relied on the former’s special knowledge. Here, expert knowledge is considered as fact.

c) In case of misrepresentation by a third person, unless such misrepresentation has created substantial mistake and the same is mutual.

d) If the misrepresentation was made in good faith. However, the same may constitute error.

Question 65

This is to give allowance to dealer’s talk or sales talk such as “The best mobile phone ever to come to the Philippines,” or “The leather belt that will last a lifetime.”

Answer 65

“Rule of Caveat Emptor = let the buyer beware”

Question 66

S, a farmer, who knows nothing about gems, tells B that in his (S’s) opinion, his ring is embellished with diamond and that he is offering to sell it to B. B buys the ring believing that the ring is adorned with diamond. Later, he discovers that the gemstone is really emerald. Can B annull the contract?

Answer 66

There is no misrepresentation here because S is not an expert in gems. However, B can have the contract annulled on the ground of mistake. But if S is a gemologist (an expert in gems), B can annul the contract on the ground of fraud.

Question 67

B wants to buy the land of S because he is interested in putting up a factory. However, S and B do not know the classification of the area where the land is located. So they consult T, a third person who deals in real property, who tells them that the land is situated in an industrial area. S and B thus proceed with the sale. Later, however, B finds out that he could not put up a factory because the land is situated in a residential area. Is the contract between S and B voidable?

Answer 67

Although generally, misrepresentation by a third person does not affect the validity of the contract, the contract in this case is voidable because the misrepresentation by T, a third person, has created a substantial mistake that is mutual.

Question 68

G bought a parcel of land from P for 1,000 per square meter. However, the reasonable price of the land in the same vicinity is 2,000 per square meter and P believed B, a third person that it is only 1,000. Can the contract be annulled?

Answer 68

In this case, the contract cannot be annulled

Note: Unless P can prove connivance between G and B to defraud him. The contract can then be annulled.

Question 69

S has a ring which he honestly believes is adorned with diamond. He offers to sell the ring to B telling B that the gemstone is diamond. B buys the ring believing it to be so. Later, he discovers that the gemstone is emerald. is there a fraud in this case? Can B annulled the contract?

Answer 69

No fraud exists here because S was in good faith. However, B may annul the contract on the ground of mistake.

Question 70

Fraud that only obliges the person employing it to pay damages but not to annull the contract.

Answer 70

Incidental fraud

Question 71

What are the requisites to make a contract voidable by reason of fraud?

Answer 71

a) The fraud should be serious.
b) The fraud should not have been employed by both contracting parties. (1344)

Question 72

What are the kinds of dolo or fraud?

Answer 72

a) Fraud in obtaining consent
b) Fraud in the performance of the obligation

Question 73

Fraud without which consent would not have been given. It renders the contract voidable.

Answer 73

Causal fraud or dolo causante

Question 74

Fraud without which consent would have still been given but the person giving it would have agreed on different terms. The contract is valid but the party employing it shall be liable for damages.

Answer 74

Incidental fraud or dolo incidente

Question 75

S sold his lot for 100,000 to B who stated in the deed of sale that he was married. The price was fixed by S at the said amount in consideration of B’s having a family to support. In reality, however, B was single. If S would have sold the lot to B whether B was married or single but that he would have given a higher price, say 105,000, had he known that B was single. What kind of fraud is this?

Answer 75

The fraud here is only incidental. The contract is not vitiated by fraud but S can recover damages in the amount of at least 5,000.

Question 76

Is one that does not intend to have any legal effect on or a change in the juridical situation of the parties.

Answer 76

Simulated contract

Question 77

What are the two kinds of simulated contracts?

Answer 77

1. Absolutely simulated contract
2. Relatively simulated contract

Question 78

One where the parties do not intend to be bound at all.

Answer 78

Absolutely simulated contract

Question 79

B is interested in buying the lot of S. S tells B to show his capacity to buy the lot by asking B to present his bank records. B, however, does not have any bank account. So he asks XYZ Bank through the manager who is his friend to certify that B is a depositor of the bank. XYZ Bank issues the certification when the truth is that B has never opened an account and made a deposit in the bank. What will happen to the contract?

Answer 79

It is void, the contract of bank deposit is absolutely simulated.

Question 80

One where the parties conceal their true agreement.

Answer 80

Relatively simulated contract

Question 81

S and B made it appear that S sold his car to B for 500,000 through a deed of sale executed by them. In reality, however, S donated the car to B. Is the sale simulated?

Answer 81

Yes, the sale is relatively simulated. S and B will be bound by the contract of donation. However, they will be bound by the sale if B is a public official since donation to a public official is void for being contrary to public policy (See Art. 789) or if as a result of the donation, the compulsory heirs of S could not receive their legitime, in which case, the heirs can demand the price from B.

Question 82

P donated his house and lot to G. They executed deed of sale instead of deed of donation to avoid paying donors tax. Is the contract simulated?

Answer 82

Yes, it is is relatively simulated

Question 83

Is its subject matter and is the creation or extinguishment of an obligation involving a thing, right or service. A thing, right or service.

Answer 83

Object of a contract

Question 84

What may be the object of contracts?

Answer 84

1. All things which are not outside the commerce of men, including future things
2. All rights which are transmissible
3. All services which are not contrary to law, morals, good customs, public order or public policy

Question 85

Public plazas, streets, sidewalks may not be the object of contracts. Future things such as the crops that may thereafter be harvested, or eggs that may be produced by a poultry farm, may be the object of contracts, but not future inheritance except in cases provided by law (Art. 1347) such as in the marriage settlements or in partition of the estate by the testator.

True or False?

Answer 85

True

Question 86

The contract involving future inheritance is void when what following requisites concur?

Answer 86

a. The succession has not been opened, i.e., the person from whom the inheritance shall come from is still alive.

b. The object of the contract forms part of the inheritance; and

c. The promisor has, with respect to the object, an expectancy or right which is purely hereditary in nature.

Question 87

A credit right may be the object of deed of assignment, so also are leasehold rights to a certain building. However, strictly personal rights, such as parental authority, or political rights such as the right to vote or to run for public office, may not be the object of contracts, as they are not transmissible.

True or False?

Answer 87

True

Question 88

Contracting the service of person for the slaughter of a dog contrary to Animal Welfare Act of 1998, is void

True or False?

Answer 88

True

Question 89

What are the requisites of object of a contract?

Answer 89

It must be within the commerce of men. (Art. 1347)

It must be transmissible. (Art 1347)

It must not be contrary to law, morals, good customs, public order or public policy (Art. 1347)

It must not be impossible. (Art. 1348)

It must be determinate as to its kind or if its quantity is not determinate, it must be possible to determine the same without the need of a new contract between the parties. (Art. 1349)

Question 90

Impossible things or services cannot be the object of a contract

True or False?

Answer 90

True

Question 91

P promise G to deliver one of his car. Is the contract valid?

Answer 91

Yes, here the contract is valid because the object is determinate

Question 92

P promise G to deliver a thing. Is the contract valid?

Answer 92

No, here, the contract is void because the object is not determinate

Question 93

P promise G to deliver his Dec 2024 harvest. Is the contract valid?

Answer 93

Yes, here, the contract is valid although the object is underterminable by quantity, it can still be determine by the time Dec 2024 will come.

Question 94

Is the essential reason why a party enters into a contract.

Answer 94

Cause

Question 95

Here, the cause for each contracting party is the prestation or promise of a thing or service by the other.

Answer 95

Onerous contract

Question 96

S sold his car to B for 100,000. What are the causes in this case?

Answer 96

The cause for S is the payment of, or the promise to pay, 100,000, by B; while the cause for B is the delivery of, or the promise to deliver, the car by S.

Question 97

C, a CPA, entered into a contract with B. a businessman, to audit the books of the latter, for a professional fee of 10,000. What are the causes in this case?

Answer 97

The cause for C is the payment of the professional fee of 10,000, while the cause for B. is the audit of his books by C

Question 98

Here, the cause is the service or benefit.

Answer 98

Remuneratory contract

Question 99

C saves D from drowning, and as a reward, D gives C 5,000. What is the cause of the contracts?

Answer 99

The saving of D from drowning is the service remunerated. The service here is not a recoverable debt to distinguish it from an onerous contract where there is a promise of service by a party

Question 100

The cause is the liberality of the benefactor.

Answer 100

Gratuitous contract or contract of pure beneficence

Question 101

Donation whose cause is the liberality of the donor, or commodatum whose cause is the liberality of the lender. What cause of contract is this?

Answer 101

Gratuitous contract or contract of pure beneficence

Question 102

Purely personal or private to other party.

Answer 102

Motive

Question 103

P buy a gun to kill G for 100,000. What is the cause and the motive in this case?

Answer 103

Here, the cause of the contract is the gun in P and the cause of the money in the seller
The motive is to kill G

Question 104

is the private or secret reason or intention of a contracting party. May vary while cause is always the same.

Answer 104

Motive

Question 105

Makes the contract void, but illegal motive does not necessary render the contract void.

Answer 105

Illegal cause

Question 106

What are the requisites of cause?

Answer 106

1. It must exist.
2. It must be lawful.
3. It must be true.

Question 107

A contract states that S sold his car to B for 500,000. The fact, however, is that B did not give S 500,000 but a diamond ring of equivalent value. The cause of the contract is false. Is the contract valid?

Answer 107

Here, the contract is not rendered void because it is founded upon another cause, the giving of a diamond ring, which is true and lawful.

However, if what B actually gave to S was several grams of “shabu”, the contract will be rendered void.

Question 108

“Fifteen days after date, I promise to pay P or order the amount of 10,000”

Is the promissory note valid if it did not state the cause received G from P?

Answer 108

Yes

Note: It is necessary that the cause must exist, but it is not necessary to state the cause in the contract because it is presumed that the cause exist and is lawful

Question 109

S sold his car to B for 500,000 because he wanted to have funds for the purchase of a dangerous drug. Is the contract valid?

Answer 109

The motive of S is illegal. However, its illegality does not affect the validity of the contract which has a lawful cause, i.e, the payment of 500,000.