Essential Requisites Of Contrcts Flashcards
What are the requisites for consent?
- Concurrence of the offer and acceptance (Art. 1319 to 1326)
- Legal capacity of the parties (Art. 1327 to 1329)
- Must be free, intelligent, voluntary, and free from defect (Art. 1330-1346)
How is consent manifested?
ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.
Acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. The contract, in such a case, is presumed to have been entered into in the place where the offer was made. (1262a)
What is an offer and acceptance?
As an element of a contract, an offer may be defined as a proposal to make a contract. In the stages of the contract, it is under the negotiation stage. The offer is not the contract itself. In order to constitute a binding proposal, the first paragraph of Art. 1319 expressly provides that the proposal must be certain or definite or is already determined. (An offer to give a parcel of land is a certain proposal.)
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Can the acceptance/offer be withdrawn?
Before the acceptance of the offer by the offeree, the offerer can withdraw the offer anytime because there is nothing binding them, because there is no
contract.
The offeree can also withdraw his acceptance only before the offerer acquires knowledge of such acceptance, because there is no contract yet
The acceptance will only be binding from the time the offerer had knowledge
of the acceptance.
What things may be fixed by the offer?
ART. 1321. The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with.
Acceptance of an Offer made through an Agent:
ART. 1322. An offer made through an agent is accepted from the time acceptance is communicated to him. (n)
When does an offer become negatory or ineffective
“ART. 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. (n)
This case basically deals about the perfection of ‘ contract based on bidding. Central to this case is the application of Article1326. This revolves on the issue whether there was a perfected contract when Pure Foods sent a reply letter confirming the award of bid to FEMSCO. There was already a perfected contract for the bid proposals were the offers and the letter (and its wordings) reflect a categorical acceptance. Thus, the elements of a contract are all present and complete, thus the contract is perfected.
FACTS: Petitioner Jazmin Soler is a well-known licensed professional interior designer. In November 1986, her friend Rosario Pardo asked her to talk to Nida Lopez, who was manager of the COMBANK Ermita Branch for they were planning to renovate the branch offices.
Ms. Lopez was asking that the designs be submitted by December 1986, which was such a short notice. Ms. Lopez assured her that she would be compensated for her services. Soler even told Ms. Lopez that her professional fee was (P10,000.00), to which Ms. Lopez acceded. They had a meeting on November 1986 where they discussed what was to be renovated.
After a few days, Soler requested for the blueprint of the building so that the proper design, plans and specifications could be given to Ms. Lopez in time for the board meeting in December 1986. Soler hired engineers and architects to help her with the project and paid them a total of P15,000.00.
Soler repeatedly demanded payment for her services personally and through counsel, but Ms. Lopez just ignored the demands as well as refused to return the blueprint. Ms. Lopez was of the opinion that Soler was not entitled to it because her designs did not conform to the bank’s policy of having a standard design, and that there was no agreement between her and the bank. Hence, Soler filed a complaint for collection of professional fees and damages.
WON there was a perfected contract between Jazmin Soler and COMBANK and Nida Lopez.
In the case at bar, there was a perfected oral contract.
A contract is a meeting of the minds between two persons whereby one binds himself to give something or to render some service to another for consideration.
A contract undergoes three stages:
(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; and
(c) consummation or death, which is the fulfillment or performance of the terms agreed upon in the contract.
When Ms. Lopez and Soler met and discussed the details of the work, the first stage of the contract commenced. When they agreed to the payment of P10,000.00 as professional fees and that she should give the designs before the December 1986 board meeting of the bank, the second stage of the contract proceeded, and when finally, petitioner gave the designs to Ms. Lopez, the contract was consummated.
On September 16, 1971, Province of Cebu leased in favor of Rufina Morales a 210 sq.m. lot which formed part of the Banilad Estate. In 1964, Province of Cebu donated several parcels of land to the City of Cebu. The City sold the lot at public auction in order to raise money for infrastructure projects. The highest bidder for the lot of Morales was Bascon but Morales could match the highest bid for she had a preferential right.
In the meantime, Province of Cebu filed a reversion of donation against City of Cebu and that they went into a compromise agreement which provided for the return of the donated lots to Province of Cebu including the Morales Lot.
When Morales died, apart from the deposit and down payment, she was not able to make any other payments on the balance of the purchase price for the lot.
On 1983, one of her nieces wrote to Cebu Governor Gullas asking for the formal conveyance of the lot to the surviving heirs. The requests were however, unheeded.
The respondents Heirs of Morales argue that the award at public auction of lot to Morales was a valid and binding contract entered into by the City of Cebu and they could not pay the balance of the purchase price during pendency due to confusion as to whom payment be made.
RTC ruled in favor of the heirs, stating that there was already a consummated sale between the City of Cebu and Rufina Morales. CA affirmed the decision. WON there was a valid sale of the subject property thereof by virtue of the auction sale.
The Award is Tantamount to a Perfected Contract of Sale
When the City of Cebu awarded the lot to Morales, it is assumed that she met all qualifications to match the highest bid. The Province of Cebu is bound to respect the contract of sale. The City of Cebu was the owner of the lot when it awarded the same to Morales.
The award is tantamount to a perfected contract of sale between Morales and the City of Cebu, while partial payment of the purchase price and actual occupation of the property by Morales effectively transferred ownership of the lot the latter.
A sale by public auction is perfected when the auctioneer announces its perfection by the fall of the hammer or in other customary manner. The contract of sale was nevertheless perfected as to Morales as the highest bidder.
There was a meeting of minds between the City of Cebu and Morales as to the lot sold and its price such that each party could reciprocally demand performance of the contract of each other for sale is a consensual contract. All elements of the contract of sale were present in this case.
CONTENTION: There is no perfected contract of sale because no Contract of Purchase and Sale was ever executed by the parties.
There is no merit in this assertion. As previously stated, a contract of sale is a consensual contract that is perfected upon a meeting of minds as to the object of the contract and its price.
Subject to the provisions of the Statute of Frauds, a formal document is not necessary for the sale transaction to acquire binding effect. For as long as the essential elements of a contract of sale are proved to exist in a given transaction, the contract is deemed perfected regardless of the absence of a formal deed evidencing the same.
Failure to pay the balance of the purchase price did not render the sale in existent but merely gave rise to the right of specific performance or rescission
The Spouses Pangan were the owners of a lot and twodoor apartment in Sampaloc, Manila. Consuelo Pangan agreed to sell to the Perreras the subject properties for the price of P540K. Three days later they agreed to increase to P580K.
Perreras issued tow checks payable to Consuelo in the amount of P200K and P250K on June 15, 1989. Consuelo refused to accept the checks because the children who are co-owners to the property did not want to sell the subject properties. Thus, she offered to return the P20,000 earnest money she received from the Perreras, but rejected, but filed for consignation.
RTC ruled in Perreras favor stating that there was a perfected contract of sale, at least insofar the share of Consuelo and that the receipt of P20K earnest money was manifestation of perfection. CA found that the payment and receipt of earnest money was the operative act that gave rise to a perfected contract and that there was nothing wrong in agreement.
Petition They alleged that there was no perfected contract. No other evidence than the finding of receipt of P20K as earnest money, there is no other evidence to show that there was perfection.,
They insist the Consuelo specifically informed Perreras that the sale still required the consent of the heirs as co-owners. The refusal of the petitioner- heirs to sell the subject properties purportedly amount to the absence of the requisite element of the consent.
ISSUE: Was there a perfected contract? If there is, what is then the nature and what is effect of belated payment?
HELD: Yes. A thing sold without the consent of all the co-owners does not invalidate the sale or render it void. The Civil Code recognizes the absolute right of a co-owner to freely dispose of his pro indiviso share as well as the fruits and benefits from that share, independently of the other co-owners.
Thus, when Consuelo agreed to sell to the Perreras the subject properties, what she sold in fact was her undivided interest which consisted of one-half interest of her conjugal share, and one-sixth interest as her hereditary share.
The presence of consent was evidenced by the payment and receipt of the P20,000 which was an earnest money. Article 1482 of the Civil Code, provides that whenever earnest money is given in a contract of sale, it shall be considered as part of the price and proof of the perfection of the contract.
All essential elements were present in this case. While the respondents required that the occupants vacate the subject properties prior to the payment of the second installment, the stipulation does not affect the perfection of the contract, but only its execution.
FACTS: Sometime in February 1995, Rica Marie S. Thio received form Carolyn M. Garcia a cross-check in the amount of US$100,000 payable to order of a certain Marilou Santiago. Thereafter, Garcia received from Thio every month certain amounts. There was another cross-check on P500K.
According to Garcia, Thio failed to pay the principal amounts of the loan which is US$100,000 and the P500,000 when they became due. Thus, on February 1996, Garcia filed a complaint for the sum of money.
Garcia alleged that on February 24, 1995, Thio borrowed from her the amount of US$100,000 with 3%int per month, which loan would mature on October 1995 covered by first check.
And on June 29, 1995, Thio borrowed from her the amount of US$100,000 with 4%int per month, which loan would mature on October 1995 covered by second check.
For both loans, no PN was executed since petitioner and respondent were close friends at the time. Thio paid the stipulated interest but failed to pay the principal. Thio denied that she contracted the two loans with Garcia and countered that it was Marilou Santiago to whom Garcia lent the money. She claimed that she was merely asked by Garcia to give crossed checks to Santiago. RTC ruled in favor of Garcia but CA reversed stating that there was no contract of loan between the parties.
ISSUE: WON there was a real contract of loan.
RULING: YES.
Loan is a Real Contract
A loan is a form of a real contract, not consensual, and as such is perfected only upon the delivery of the object of the contract. Upon delivery of the object of the contract of loan (which is the money received by the debtor when the checks were encashed) the debtor acquires ownership of such money or loan proceeds and is bound to pay the creditor an equal amount. It is undisputed that the checks were delivered to respondent. However, these checks were crossed and payable
Thus, the main question left to be resolved is that: who borrowed money from Garcia, is it Thio or Santiago?
Garcia argues that it was upon Thio’s instruction that both checks were made payable to Santiago. Garcia maintains that it was also upon Thio’s instruction that both checks were delivered to her, so she could in turn deliver the same to Santiago. The court agrees with Garcia.
Delivery is the act by which the substance thereof is placed within the actual or constructive possession or control of another. Although Thio did not physically receive the proceeds of the checks, the instruments were placed in her control under an arrangement whereby she actually re-lent the amount to Santiago.
Respondent Posadas are the owners of several parcels of land. SMIC (SM Investments Corporation), through its President, Henry Sy, Jr. (Mr. Sy), sent respondents Posadas a written offer for a joint venture for the development of the subject property.
In reply, respondents Posadas sent a written counterproposal stating that the goodwill money should be not less than P80M and if acceptable, they will be ready to sign the Joint Venture Agreement (JVA).
On August 24, 1995, SMIC sent Posadas another letter containing its acceptance of the counter-offer, accepting the counterproposal of goodwill money in the amount of P80M.
SMIC, in compliance with what it considered as a perfected contract for the joint venture, sent respondents four (4) drawings of the proposed mall and its location within the subject property., However, after receiving the aforementioned drawings, respondents Posadas sent SMIC a letter informing it that they had received several other offers for the subject property, and demanding that SMIC better the said offers, before they submit their comments on the drawings.
SMIC, through counsel, sent respondents Posadas a letter reminding them to respect the joint venture agreement for the development of the subject property.
It appearing that respondents Posadas were not willing to honor the joint venture agreement, SMIC filed a case for Specific Performance and Damages with Prayer for Temporary Restraining Order and Writ of Preliminary Injunction against respondents Posadas.
ISSUE: WON the contract for joint venture has been perfected.
RULING: It is basic in this jurisdiction that a contract is perfected by mere consent of the parties. Based on the above-mentioned provisions of law, the facts in this particular case show that a contract for a joint venture between the parties has, in fact, been perfected.
First, the Letter of 08 August 1995 embodies a complete offer on the part of SMIC in that it contained an object certain, which is the joint venture for the development of the Subject Property, and a specific cause and/or consideration therefor, which are the goodwill money in the amount of P70 Million, plus a 60/40 sharing, in favor of respondents of the said development.
Second, the Letter dated 18 August 1995 in return embodies a complete counter-offer on the part of respondents in that they conveyed their acceptance of the joint venture subject only to the counter-proposal to increase the goodwill money from P70 Million to P80 Million.
Third, the Letter dated 24 August 1995 contains an unqualified, acceptance on the part of SMIC of the above-mentioned counter-proposal of respondents, again on the aspect of the goodwill money alone.
At this point, following the above-quoted provisions of the Civil Code, particularly Articles 1318 and 1319 thereof, we agree with the finding of the Trial Court that a joint venture agreement between the parties has been perfected, in that (i) there is consent, or a meeting of the minds, (ii) there is an object certain, which is the joint venture, and (iii) there is a cause and/or consideration, which are the goodwill money and specific sharing scheme.
What is an option contract?
It is a contract granting a person the privilege to buy a certain object at any time within the agreed period at a fixed price.
What is an option money?
The consideration paid in an option contract is an option money. It is separate and distinct from the that of the consideration of the principal contract. And it is not deducted from the purchase price of the principal contract upon acceptance of the offer.
Macaria Labingisa Reyes was the owner of a 600 sq.m. lot located at Baesa, Caloocan City. In 1971, she sold 300 sq.m. of the lot to Spouses Villamor for P21K. Earlier, Macaria borrowed P2K from the spouses which amount was deducted from the total purchase price of the property sold.
On November 11, 1971, Macaria executed a Deed of Option in favor of Villamor in which the remaining 300 sq.m. of the lot would be sold to Villamor under certain conditions.
When Reyes offered to repurchase, the lot sold by them Villamor refused and reminded them instead that the Deed of Option in fact gave them the option to purchase the remaining option.
RTC ruled in favor of Villamor spouses. CA reverses trial court. ISSUE: WON, the Deed of Option is valid.
Ordinarily, an optional contract is a privilege existing in one person, for which he had paid a consideration, and which gives him the right to buy, for example, certain merchandise or certain specified property, from another person, if he chooses, at any time within the agreed period at a fixed price.
ACTS: Lourdes Limson alleged that Spouses De Vera offered to sell to Limson a parcel of and informed her that they were the owners of the subject property. Limson agreed to buy the property at the price of P34/sq.m. and gave the sum of P20K as earnest money and respondent De Vera issued a receipt and gave her a 10-day option period to purchase the property.
On 23 August 1978 Limson allegedly gave respondent Lorenzo de Vera three (3) checks for the settlement of the back taxes of the property and for the payment of the quitclaims of the three (3) tenants of subject land. The amount was purportedly considered part of purchase price and respondent Lorenzo de Vera signed the receipts therefor.
Limson was surprised to learn that the property was subject to negotiation for the sale to Sunvar Realty.
A Deed of Sale between De Vera and Sunvar was made on September 26, 1978. Limson claimed that the Spouses de Vera ignored her right to purchase the property. In their Answer, the Spouses De Vera stated that the option to buy the property had long expired and that there was no perfected contract to sell
Limson argues that there was a perfected contract to sell between her and De Vera meanwhile the respondents argued that what was contract was merely an option contract.
ISSUE: WON the contract was a contract of option or a contract to sell
RULING: the agreement between the parties was a contract of option and
not a contract to sell.
Option Contract, Definition
It is also sometimes called an “unaccepted offer.” An option is not itself a purchase, but merely secures the Privilege to buy. It is not a sale of property but a sale of right to purchase. It is simply a contract by which the owner of property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time.
Its distinguishing characteristic is that it imposes no binding obligation on the person holding the option, aside from the consideration for the offer. Until acceptance, it is not a contract, and does not vest, transfer, or agree to transfer, any title to, or any interest or right in the subject matter, but is merely a contract by which the owner of the property gives the optionee the right or privilege of accepting the offer and buying the property on certain terms.
In this case, the receipt shows that they only entered into a contract of option and not a contract of sale. A contract by which Spouses De Vera and Limson agreed that Limson shall have the right to buy the property at a fixed price within 10 days.
Respondent spouses did not sell their property; they did not also agree to sell it; but they sold something, i.e., the privilege to buy at the election or option of petitioner. The agreement imposed no binding obligation on petitioner, aside from the consideration for the offer.
The consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as “earnest money.”
However, a careful examination of the words used indicated that the money is not earnest money but option money.
There was nothing in the receipt stating that the amount was part of the purchase. The receipt did not reveal that she was bound to pay the balance of the purchase price.
The option period(10 days) having expired, and acceptance was not effectively made by petitioner, the purchase of subject property by respondent SUNVAR was perfectly valid and entered into in good faith.
Distinguish between optionmoney and earnest money
Earnest money and option money are not the same but distinguished thus:
(a) earnest money is part of the purchase price, while option money is the money given as a distinct consideration for an option contract;
(b) earnest money is given only where there is already a sale, while option money applies to a sale not yet perfected; and,
(c) when earnest money is given, the buyer is bound to pay the balance, while when the would-be buyer gives option money, he is not required to buy, but may even forfeit it depending on the terms of the option.
FACTS: Angelica Lacson and her children were owners of three parcels of land which were tenanted agricultural lands. On 1996, a group of original farmers/tillers executed in favor of Tayag Deeds of Assignments assigning their respective rights as tenants/tillers of the landholdings possessed and tilled by them. Tayag was also given exclusive right to buy property when they agree to sell.
Defendant-tenant however instead of attending meeting gave notice of their collective decision to sell all their rights and interests over the landholding to Lacson.
Tayag filed with the RTC for the court to fix a period on payment of purchase price to the defendants-tillers as provided in the Deed of Assignment. Lacson sought for injunction.
ISSUE: WON tenants can execute an option contract in favor of Tayag.
Under Article 1306 of the New Civil Code, the respondents may enter into contracts covering their property with another under such terms and conditions as they may deem beneficial provided they are not contrary to law, morals, good conduct, public order or public policy.
The respondents cannot be enjoined from selling or encumbering their property simply and merely because they had executed Deeds of Assignment in favor of the petitioner, obliging themselves to assign and transfer their rights or interests as agricultural farmers/laborers/sub-tenants over the landholding, and granting the petitioner the exclusive right to buy the property subject to the occurrence of certain conditions.
The respondents were not parties to the said deeds. There is no evidence that the respondents agreed, expressly or impliedly, to the said deeds or to the terms and conditions set forth therein. Indeed, they assailed the validity of the said deeds on their claim that the same were contrary to the letter and spirit of P.D. No. 27 and Rep. Act No. 6657.
The petitioner even admitted when he testified that he did not know any of the respondents, and that he had not met any of them before he filed his complaint in the RTC. He did not even know that one of those whom he had impleaded as defendant, Angelica Vda. de Lacson, was already dead.
An option is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time.
It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale.
The defendants-tenants-subtenants, under the deeds of assignment, granted to the petitioner not only an option but the exclusive right to buy the landholding. But the grantors were merely the defendants-tenants, and not the respondents, the registered owners of the property. Not being the registered owners of the property, the defendants- tenants could not legally grant to the petitioner the option, much less the “exclusive right” to buy the property. As the Latin saying goes, “NEMO DAT QUOD NON HABET.”
Almost 40 years ago or on August 6, 1976, Keppel Holdings (Keppel) entered into a Lease Agreement with Lusteveco covering 11 hectares of land Batangas. The lease was for a period of 25 years for a consideration of P2.1M. At the option of Lusteveco, the rental fee could be totally or partially converted into equity shares in Keppel.
At the end of the 25-year period, Keppel was given the firm and absolute option to purchase the land for P4.09M provided that it had acquired the necessary qualification to own land under Philippine laws at the time the option is exercised. When the lease agreement was executed, less than 60% of the shareholding was Filipino-owned thus, it was not yet constitutionally qualified to acquire private lands.
At the end of the 25-year lease period or in 2001, Keppel remained unqualified to own private lands, the agreement provided that the lease would be automatically renewed for another 25 years. Keppel was further allowed to exercise the option to purchase the land up to the 30th year of lease or in 2006, also on the condition that, by then, it would have acquired the requisite qualification to own land in the Philippines. PNOC acquired the land from Lusteveco.
On 2000, Keppel wrote PNOC infirming that at least 60% of its shares were now Filipino-owned and expressed its readiness to exercise its option to purchase the land. PNOC did not favorably respond to repeated demands. Keppel then filed a complaint for specific performance.
RTC ruled in favor of Keppel and ordered PNOC to execute a deed of absolute sale upon payment by Keppel of the P4.09M purchase price. CA affirmed RTC ruling.
ISSUE: WON the option contract is valid
An option contract is a contract where one-person (the offeror) grants to another person (offeree) the right or privilege to buy or to sell a determinate thing at a fixed price, if he or she chooses to do so within an agreed period.
As a contract it must necessarily have the essential elements of subject matter, consent and consideration. Even though it is deemed as a preparatory contract to the principal contract of sale, it is separate and distinct therefrom.
hen you see a billboard of Coke which advertises the 8 oz. Coke product with SRP of PhP 12.00. The next day, you decide to go to the Coke plant to buy Coke and argue that the advertisement was their offer to sell you coke and you aregiving your acceptance
Is that correct?
No. Advertisements are merely proposals of suggested retail price. When you go to retailers or grocery store, there is usually a markup; otherwise, the grocery will go bankrupt.
These advertisements are NOT offers. They are mere invitations to make an offer..
ART. 1326. Advertisements for bidders are simply invitations to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. (n
How about the price tags on the grocery items? Are those offers?
Of course. The price tags indicate the consideration to be offered. The moment you pay for it, there is a contract of sale perfected by mere consent.
Who are those persons who cannot give their consent to a contract?
ART. 1327. The following cannot give consent to a contract: (1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write. (
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What if the wife acts through an agent or a legal representative, selling her exclusive property to the husband? Is that allowed?
NO. This disqualification determined by law is an absolute prohibition; it completely takes away the right of the parties to enter into certain contracts. Incapacity merely restrains the right to contract of persons under 1327.
Incapacity is based on the subjective circumstances of certain persons as enumerated under 1327; whereas, disqualifications established under law are based on public policy and morality.
