CHAPTER 2 - ESSENTIAL ELEMENTS OF A CONTRACT (ART. 1318 - 1355) Flashcards
There is no contract unless the following requisites concur:
(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)
Is the manifestation of the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.
Consent
A proposal to enter into a contract.
Offer
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.
Acceptance
Must be certain, it must not be a mere joke, it should be seriously intended and must be definite.
Offer
It is absolute, it must be unqualified and accepted it without condition.
Acceptance
Rejection of the original offer, offering another other than the original offer (there is no meeting of minds)
Counter offer
Extinguished the original offer
It may or may not be accepted by the original offerer
Note: Qualified acceptance constitute a counter offer
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?
Yes, because there is no perfection of contract, there is still no consent.
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?
Yes, there is no acceptance so it is still absolute, a qualified acceptance
What are the requisites of consent?
- There must be two or more parties
- The parties must be capable or capacitated
- There must be no vitiation of consent
- There must be no conflict between what was expressly declared and what was really intended
- Intent must be declared properly
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?
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.
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?
- There is no contract, prior to the receipt of the letter of the acceptance, the offer had already been withdrawn.
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?
There is no contract, prior to the receipt of the letter of the acceptance, the offer had already been withdrawn.
An acceptance may be express or implied.
True or False?
True
The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with.
True or False?
True
Are extension of the personality of his principal
Agent
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?
No
An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed.
True or False?
True
This is an accessory penalty
Civil interdiction
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?
Yes, he can withdraw the contract as long as it is communicated. (General rule)
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?
No, because the offer was founded in consideration (Exception to the general rule)
When offerer gave the offeree a period or days to accept the offeree
Option Contract
It is the money paid or promised for the option
Option Money
For Sale: 100 Square meter lot with 2-storey house located at 123, ABC St. Malate, Manila for 10,000,000 cash.
Definite Offer
For Sale: 100 Square meter lot, at 10 million to 20 million lot at 123, ABC St. Malate, Manila.
Mere Invitation
Are binding and valid unless they are annulled in court
Voidable contracts
What are characteristic of a consent
- Consent must be intelligently given
- Consent must be free and voluntary
- Consent must be conscious or spontaneous
What are the grounds for vitiated consents?
Mistake, Violence, Intimidation, Undue Influence, Fraud
Is the erroneous belief regarding the material facts of a contract at the time it was entered into.
Mistake
When does error or mistake vitiates consent?
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
When mistake will invalidate consent?
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.
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?
Yes, If G only knew that P will only deliver 16k gold, G will not enter into the contract.
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?
Yes, S can have the sale annulled because of a mistake as to the condition of the contract.
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?
Voidable contract
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?
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.
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?
Yes, P, here, can have the employment contract set aside on the ground of mistake qualification.
When does mistake not vitiate consent?
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
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?
NO, the mistake in computation will not render the contract voidable but will only be corrected.
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?
True
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?
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
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?
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.
What are the requisites of a mutual error?
Mutual error
Legal effect of an agreement
Real purpose of the parties is frustrated
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?
Yes, Here, the real purpose of the parties is frustrated. Therefore, their remedy is annullment.
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?
Yes, either party may annul the contract on such ground.
More on physical coercion
Violence
More on moral or mental coercion
Intimidation
When in order to wrest consent, serious or irresistible force is employed.
Violence
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?
Consent here is given because of violence.
What are the requisites for violence to vitiate consent?
- Employment of serious or irresistible force
- It must be the reason why the contract was entered into
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.
Intimidation
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?
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
What are the requisites for Intimidation to vitiate consent?
- Reasonable and well-grounded fear
- Of an imminent and grave evil
- Upon his person, property, or upon the person or property of his spouse descendants or ascendants
- It must be the reason why the contract was entered into
- The threat must be of unjust act, an actionable wrong
What are the factors to be considered in determining the degree of intimidation?
a) age,
b) sex, and
c) condition of the person
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?
True
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?
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.
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?
True
When a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice.
undue influence
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?
Yes, the contract if entered into will be voidable at the instance of the member on the ground of undue influence.
Factors to be considered in determining the existence of undue influence:
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.
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.
Causal fraud or dolo causante
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?
Yes, B can have the contract annulled on the ground of causal fraud or dolo causante.
Requisites for Dolo Causante?
- The fraud must be material and serious
- The fraud must be employed by only one party
- Deliberate intent to deceived
- The other party must have rely on that untrue statement, and must not be negligent
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?
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.
When no fraud exists
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.
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.”
“Rule of Caveat Emptor = let the buyer beware”
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?
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.
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?
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.
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?
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.
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?
No fraud exists here because S was in good faith. However, B may annul the contract on the ground of mistake.
Fraud that only obliges the person employing it to pay damages but not to annull the contract.
Incidental fraud
What are the requisites to make a contract voidable by reason of fraud?
a) The fraud should be serious.
b) The fraud should not have been employed by both contracting parties. (1344)
What are the kinds of dolo or fraud?
a) Fraud in obtaining consent
b) Fraud in the performance of the obligation
Fraud without which consent would not have been given. It renders the contract voidable.
Causal fraud or dolo causante
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.
Incidental fraud or dolo incidente
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?
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.
Is one that does not intend to have any legal effect on or a change in the juridical situation of the parties.
Simulated contract
What are the two kinds of simulated contracts?
- Absolutely simulated contract
- Relatively simulated contract
One where the parties do not intend to be bound at all.
Absolutely simulated contract
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?
It is void, the contract of bank deposit is absolutely simulated.
One where the parties conceal their true agreement.
Relatively simulated contract
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?
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.
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?
Yes, it is is relatively simulated
Is its subject matter and is the creation or extinguishment of an obligation involving a thing, right or service. A thing, right or service.
Object of a contract
What may be the object of contracts?
- All things which are not outside the commerce of men, including future things
- All rights which are transmissible
- All services which are not contrary to law, morals, good customs, public order or public policy
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?
True
The contract involving future inheritance is void when what following requisites concur?
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.
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?
True
Contracting the service of person for the slaughter of a dog contrary to Animal Welfare Act of 1998, is void
True or False?
True
What are the requisites of object of a contract?
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)
Impossible things or services cannot be the object of a contract
True or False?
True
P promise G to deliver one of his car. Is the contract valid?
Yes, here the contract is valid because the object is determinate
P promise G to deliver a thing. Is the contract valid?
No, here, the contract is void because the object is not determinate
P promise G to deliver his Dec 2024 harvest. Is the contract valid?
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.
Is the essential reason why a party enters into a contract.
Cause
Here, the cause for each contracting party is the prestation or promise of a thing or service by the other.
Onerous contract
S sold his car to B for 100,000. What are the causes in this case?
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.
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?
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
Here, the cause is the service or benefit.
Remuneratory contract
C saves D from drowning, and as a reward, D gives C 5,000. What is the cause of the contracts?
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
The cause is the liberality of the benefactor.
Gratuitous contract or contract of pure beneficence
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?
Gratuitous contract or contract of pure beneficence
Purely personal or private to other party.
Motive
P buy a gun to kill G for 100,000. What is the cause and the motive in this case?
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
is the private or secret reason or intention of a contracting party. May vary while cause is always the same.
Motive
Makes the contract void, but illegal motive does not necessary render the contract void.
Illegal cause
What are the requisites of cause?
- It must exist.
- It must be lawful.
- It must be true.
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?
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.
“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?
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
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?
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.
