bsu lecture on contracts
TRANSCRIPT
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CONTRACTS
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What is a contract?
A contract is a meeting of the minds between
two persons whereby one binds himself, with
respect to the other, to give something or to
render some service.
A contract is a juridical convention manifested
in legal form, by virtue of which, one or morepersons bind themselves in favor of another
or others, or reciprocally, to the fulfillment of
a prestation to give, to do, or not to do.
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Art. 1318. There is no contract
unless the following requisitesconcur:
(1) Consent of the contracting parties;(2) Object certain which is the subject
matter of the contract;
(3) Cause of the obligation which isestablished.
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Stages in the Life of a Contract
1. Preparation or conception bargaining
point.
2. Perfection or birth the meeting ofminds regarding the subject matter and
the cause of the contract.
3. Consummation or death parties haveperformed their respective obligations and
the contract is put to an end.
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Kinds of Innominate Contracts
1. do ut des(I give that you may give)
2. do ut facias(I give that you may do)
3. facio ut facias
(I do that you may do)
4. facio ut des
(I do that you may give)
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What are the principal characteristics of a
contract?
AMOR = love
1. Autonomy2. Mutuality
3. Obligatory Force andConsensuality
4. Relativity
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What is autonomy of contracts?
GR: The parties are free to stipulate anything they may deemconvenient.
XPN:
As long as the stipulation are not contrary to:1. Law
2. Morals
3. Good Customs
4. Public Order
5. Public Policy (Art. 1306)
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What is relativity of contracts?
GR: A contract is binding not onlybetween parties butextendsto the heirs, successors in interest, and assignees of the
parties,providedthat the contract involves transmissible rights
by their nature, or by stipulation or by provision of law
XPN:
1.Stipulation pour autrui(stipulation in favor of a 3rd person)
benefits deliberately conferred by parties to a contract upon 3rd
persons;
2.When a 3rd person induces a party to violate the contract;
3.3rd persons coming into possession of the object of the
contract creating real rights;
4.Contracts entered into in fraud of CRs.
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REQUISITES OF STIPULATION POUR ATRUI:
1. The stipulation must bepart, not whole of thecontract
2. Contracting parties must have clearly &
deliberately conferreda favor upon 3rd person
3. 3rd person must have communicatedhis
acceptance
4. Neitherof the contracting parties bears the legal
representation of the 3rd person
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Distinguish consensual from real contracts and name
at least four (4) kinds of real contracts under the present
law.SUGGESTED ANSWER:
CONSENSUAL CONTRACTS are those which are
perfected by mere consent (Art. 1315. Civil Code).
CONTRACTS are those which are perfected by the
delivery of the object of the obligation. (Art. 1316, Civil
Code)
Examples of real contracts are deposit,
pledge, commodatum and simple loan (mutuum).
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Essential Requisites of a Contract
(Always COCa-Cola)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.
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I. CONSENT
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 theacceptance absolute. A qualified
acceptance constitutes a counter-
offer. (1319)
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REQUISITES OF CONSENT:
1. Plurality of subject
2. Capacity
3. Intelligence and free will4. Manifestation of intent of
parties
5. Cognition by the other party6. Conformity of manifestation
and cognition
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Theories on Consent
We follow the theory ofcognition and not the theory of
manifestation.
Under our civil law, the offer and
acceptance concur only when the
offeror comes to know, and notwhen the offeree merely
manifests his acceptance.
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Certain offer = Absolute acceptance;
If qualified, counter-offer.Consent is manifested by the meeting of
the offer and the acceptance upon the
thing and the cause which are toconstitute the contract.
The offer must be certain and the
acceptance absolute.
A qualified acceptance constitutes a
counter-offer. (1319)
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Offer & Acceptance
Mode of acceptance as stipulation.The person making the offer may fix the time,
place, and manner of acceptance, all of
which must be complied with. (1321)
Agent as offerer
An offer made through an agent is acceptedfrom the time acceptance is communicated to
him. (1322)
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Offer & Acceptance
Withdrawal of Offer (1324)General Rule: An offer or proposal may be
withdrawn as long as the offeror has no
knowledge that the offeree has alreadyaccepted the offer.
Exception: When the option is founded upona consideration, as something paid or
promised, the offer cannot be withdrawn.
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When does the offer become ineffective?
1. Death, civil interdiction, insanity orinsolvency of either party before acceptance
is conveyed;
2. Express or implied revocation of the offerby the offeree;
3. Qualified or conditional acceptance of the
offer;4. Subject matter becomes illegal or
impossible before acceptance is
communicated.
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Rule on Complex Offers
1. When offers are interrelated thecontracted can only be perfected if all the
offers are accepted.
2. When offers are not interrelated
the single acceptance of each offer
results in a perfected contract unless the
offeror has made it clear that one is
dependent upon the other and
acceptance of both is necessary.
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Rule on Complex Offers
*An Offer inter praesentes must be acceptedimmediately.
If the parties intended that there should be an
express acceptance, the contract will be perfected
only upon knowledge by the offeror of the express
acceptance by the offeree of the offer.
An acceptance which is not made in the manner
prescribed by the offeror is not effective, but it takesthe form of a counter-offer which the offeror may
accept or reject. (Malbarosa vs. CA, G.R. No.
12576, 2003)
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Advertisements as Offers
Business advertisements of things forsale are not definite offers, but mere
invitations to make an offer, unless it
appears otherwise.(1325)
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. (1326)
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ACCEPTANCE
The manifestation by the offeree ofhis assent to the terms of the offer.
Elements of Valid Acceptance1. Unequivocal
2. Unconditional
*If qualified, it constitutes a counter-
offer.
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ACCEPTANCE
a) offer is made to a person present acceptance must be
made immediately
b) offer is made to a person absent acceptance may be
made within such time that, under normal circumstances, an
answer can be received from him;
*Acceptance may be revoked before the offeror finds out
about it.
*Amplified Acceptance - under certain circumstances, a
mere amplification on the offer must be understood as an
acceptance of the original offer, plus a new offer which is
contained in the amplification.
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WITHDRAWAL OF ACCEPTANCE
1. First View (Manresa): It is to be observedthat although the
offeror is not bound until he learns of the acceptance, the
same thing can not be said of the offeree who, from the
moment he accepts, loses the power to retract such
acceptance since the right to withdraw between the time of the
acceptance and its communication is a right which isexpressly limited by law to the offeror;
*To justify the inequality between the contracting parties,
Manresa said that since the offeree is the first to know aboutthe concurrence of will if the parties, as a consequence, the
obligation, as far as he is concerned, must also commence
earlier.
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WITHDRAWAL OF ACCEPTANCE
2. Second View (Tolentino):Acceptance may be revoked before it
comes to the knowledge of the offeror
because in such a case, there is still nomeeting of minds, since the revocation
has cancelled or nullified the
acceptance which thereby ceased tohave any legal effect.
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Acceptance by Letter or Telegram
When is it binding?Acceptance is binding only from the time
the offerer had knowledge of it.
Where is it binding?
The contract is presumed to have beenentered into in the place where the offer
was made.
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Revocation of Acceptance
The acceptance by the offeree may berevoked before reaching the knowledge of
the offeror.
If it is revoked, the contract is not perfected ifthe notice of revocation reaches the offeror
before the letter of acceptance is received.
*In unilateral promises, when offer is made tothe public, specific acceptance is not required
to bind the obligor.
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WHAT IS AN OPTION?
It is a preparatory contract in which oneparty grants to the other, for a fixed period
to decide whether or not to enter into a
principal contract.*An option may be withdrawn anytime
before acceptance is communicated but
not when supported by a considerationother than purchase price: option
money
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RULES ON OPTIONS
*A unilateral promise to buy or sell, if not supported by a
distinct consideration, may be withdrawn but may not be done
whimsically or arbitrarily; the right of the grantee here is
damages and not specific performance. (Ang Yu v. CA, 1994)
*An option clause in order to be valid and enforceable must
indicate the definite price at which the person granting the
option is willing to sell, contract can be enforced and not only
damages. (Equatorial v. Mayfair, 24 SCRA 483)
*The right of first refusal may be enforced by specific
performance. (Paranaque Kings v. CA, 1997)
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Persons Who Cannot Give Valid Consent
1. Unemancipated Minors2. Insane or demented persons
3. Deaf-mutes or illiterates who do not know how
to write
4. Intoxicated persons and hypnotized persons
5. A person underMistake -- since a mistake may
deprive one of intelligence. (1331)
6. A person induced by Fraud (dolo causante)(1338)
Note:*Dolus bonus (usual exaggerations in trade)
are not in themselves fraudulent
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Rule on Contracts Entered into By Minors
General Rule: These contracts are considered voidable.
Exceptions
1. Minor is Estopped for having misrepresented his age and misled the
other party (when age is close to age of majority as in the Mercado v.
Espiritu & Sia Suan v. Alcantara cases)
2. They were contracts for necessities such as food, but here thepersons who are bound to give them support should pay therefor upon
reaching age of majority they ratify the same;
3. They were entered unto by a guardian and the court having jurisdiction
had approved the same right of first refusal may be enforced by specific
performance;4. Voluntary fulfillment of a natural obligation provided that the minor is
between 18-21 years of age;
5. Contracts of Life, health or accident insurance taken on the life of the
minor.
R l C E d i b I
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Rule on Contracts Entered into by Insane or
Demented Persons or Those Who Were
Intoxicated or Hypnotized
Contracts entered into during a lucid interval
are valid.
Contracts agreed to in a state of drunkennessor during a hypnotic spell are voidable. (1328)
The incapacity declared in article 1327 is
subject to the modifications determined by law,and is understood to be without prejudice to
special disqualifications established in the
laws. (1329)
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Rule on Contracts Entered into under Mistake
In order that mistake may invalidate consent, it should refer to
the substance of the thing which is the object of the contract, orto those conditions which have principally moved one or both
parties to enter into the contract. (1331)
As to identity or qualifications: Mistake as to the identity or
qualifications of one of the parties will vitiate consent only whensuch identity or qualifications have been the principal cause of
the contract.
Correction only if: A simple mistake ofaccount shall give rise
to its correction. (1331)
- Error must be excusable, not caused by negligence
- Error must be a mistake of fact, not of law
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Rule on Contracts Entered into under Mistake
Exceptions on Mistake:
1. Illiterate party (1332)
2. Knowledge of doubt, contingency,
risk affecting the object of the
contract (1333)3. Mutual error (1334)
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Disqualified to Enter into Contracts
Contracts consented into by the following are
void:1. those undercivil interdiction
2. hospitalized lepers
3.prodigals4. deaf and dumb who are unable to readand write
5. those who by reason of age, disease, weak mind
and other similar causes, cannot without outside aid,
take care of themselves and manage their property,
becoming an easy prey for deceit and exploitation.