review notes-art 1321-1350-joyce.docx

Review notes prepared by JOYCE ARTICLES 1321-1350 of 29

CHAPTER 2

ESSENTIAL REQUISITES OF CONTRACTS GENERAL PROVISIONS Art. 1318. 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)

SECTION 1

CONSENT 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 offeror 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)•

CONSENT (as applied to contracts): concurrence of the wills of the contracting parties with respect to the object and the cause which shall constitute the contract•

Requisites:

1.consent must be manifested by the concurrence of the offer and the acceptance (Arts. 1319-1326);2.contracting parties must possess the necessary legal capacity (Arts. 1327-1329); and

3.consent must be intelligent, free, spontaneous and real (Arts. 1330-1346) *Forms: Consent may either be express or implied. There is also a presumptive consent, which is the basis of quasi-contracts.

*Manifestation: Consent is manifested by the concurrence of offer and acceptance with respect to the object and the cause of the contract. Once there is such a manifestation, the period or stage of negotiation is terminated. If consensual, the contract is perfected.


*A unilateral proposition must be definite (distinguished from mere communications), complete (stating the essential and non-essential conditions desired by the offeror), and intentional (serious) when accepted by another party for such proposition to form a valid contract. However, a unilateral promise is not recognized by our Code as having obligatory force. To be so, there must been acceptance that shall convert it into a contract.

*Mental reservation—when a party makes a declaration but secretly does not desire the effects of such declaration. The mental reservation of the offeror, unknown to the other, cannot affect the validity of the offer.

ACCEPTANCE – the manifestation by the offeree of his assent to the terms of the offer. Without acceptance there will be no meeting of the minds of the two parties.

Acceptance must be absolute It must be identical in all respects with that of the offer so as to

produce consent or meeting of the minds.Qualified accepatance must be accepted absolutely to have a ontract

Art. 1320. An acceptance may be express or implied.

Implied acceptance may arise from acts or facts which reveal the intent to accept, such as the consumption of the things sent to the offeree, or the fact of immediately carrying out of the contract offered.

Art. 1321. The person making the offer may fix the time, place, and manner of acceptance, all of which must be complied with.

The offer with a period lapses upon the termination of the period. Thus the acceptance, to become effective, must be known to the offeror before the period lapses.

Things that may be fixed by the offeror:1. Time2. Place3. Manner of acceptance


A “contract to purchase “ which does not give specific description of the object to be purchased nor the rate of exchange to be used is preliminary agreement.

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Art. 1322. An offer made through an agent is accepted from the time acceptance is communicated to him.

ACCEPTANCE OFAN OFFER MADE THUAN AGENT1. Both the offer and acceptance are made thru the agent.2. Any other intermediary (who is not an agent, with power to bind) is merely a

sort of messenger, who must communicate to the person who sends him; otherwise, there is yet no meeting of minds.

Query:Suppose the principal himself made the offer, and acceptance is communicated

to the agent, wouldthe articleapply? Wold there be a meeting of the minds?

Ans: It is submitted that as a general rule, there would as yet no meeting of the minds for the agent maybe an ordinary one, not authorized to receive the acceptance for particular. However, if the agent was expressly authorized to receive the acceptance, or if the offeree had been told that acceptance could be made direct with the agent, who would then be given freedom to act or to proceed, there can a meeting of the minds and a perfection of the contract.

An intermediary who has no power to bind either the offeror or the offeree is not an agent; his situation is similar to that of a letter carrier.

Art. 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed.

INSTANCES WHEN OFFER BECOMES INEFFECTIVE:1. Whwn the offeree expressly or impliedly rejects the offer.2. Whe the offer is accepted with a qualification or condition (merely) arise he

counter offer).3. When before the acceptance is communicated the subject matter has become

illegal or impossible.4. Whe the period time give to the offeree with which must signify his acceptance

has already lapsed.5. When the offer is revoked in due time ( that is , before the offeror has learned of

its acceptance by the offeree.

Other examples when offer becomes ineffective:

1. A make an offer to B on Jan 1.B makes known his acceptance in a letter received at the house of A on January 5. However, on Jan.4, A died. Here the offer is ineffective because there is no meeting of the minds.


2. A makes an offer to B on Jan.1. B writes a letter on Jan. 3 accepting the offer. This letter is received by A on Jan. 5. But on Jan. 4, B had died. Here, the offer is also ineffective, because there was no meeting of the minds.

Note: If one of the parties at the time of making the offer or the acceptance was already insane, it maybe said that there is a meeting of the minds, in a sense, because the contract is not void, but merely voidable, that is valid until annulled.

Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at any time before acceptance by communicating such withdrawal, except when the option is founded upon a consideration, as something paid or promised.

It is not the moment of sending but the time of receipt of the revocation or acceptance which is controlling. The delay in transmission is at the risk of the sender, because he is the one who selects the time and the manner of making the transmission. Contract of Option: This is a preparatory contract in which one party grants to the other, for a fixed period and under specified conditions, the power to decide whether or not to enter into a principal contract. It must be supported by an independent consideration, and the grant must be exclusive.

General Rule : If the offerer ha allowed the offeree a certain period to accept, the offer maybe withdrawn at any time before acceptance by communicating such withdrawal.

Examples:

1. B interested I a particular car at the car exchange company, asked S for the price. S said: “P3.5M”. B however could not make up his mind whether to buy or not. So S told B, “B, I’ll give you a week to make up your mind. In the meantime, I will reserve this car for you.” Before the week is over, can S withdraw the offer to sell the car for P3.5M?

Ans.: YES, provided B has not yet signified his acceptance of the offer to sell, that is, B has not yet bought the car, and provided that S communicates such withdrawal to B. Thus, S may, without liability to B, sell to another.

2. A offered to sell is house and lot for P10M to B, who was interested in buying the same. In this letter o B, a stated that he was giving B period of one month within which to raise the amount, that as soon as b is ready , they will sign the deed of sale. One wk before the expiration of the one-month the period, A went to B, and told him that he is no


longer willing o sell the property unless he price is increased to P15M. May B compel A to accept the P10M first offered, and executed the sale?

Ans: No, here the promise to sell (or the option granted B to buy) had no cause or consideration distinct from the price.

EXCEPTION: when the OPTION is founded upon a consideration as something paid or promised.

Example: If S had been given P20 by B in consideration for the option, S cannot withdraw the offer to sell until after the expiration of the one-week period.

OPTION ---- a contract granting a person the privilege to buy or not t buy a certain objects at anytime within the agreed period at a fixed price.

*The contract of option is a separate and distinct contract from the contract which the parties may enter into upon consummation of the contract. Therefore, an option must have its own CAUSE OR COSIDEAION, a cause distinct from the selling price itself .Of course, the consideration may be pure LIBERALITY

PERFECTION OF AN OPTION:

Option is not perfected unless there is no meeting of the minds on the option. Thu, The offer to grant an option, even if founded on a distinct case or consideration, may itself be withdrawn before the acceptance of the offer of an option.

Example:

If S had offered to grant B a week’s time if B would give P20,may S still withdraw the offer of option before B signifies his acceptance thereof?

Ans.: YES, because the option here does not yet exist.

Art. 1325. Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer.

Business Advertisements of things for sale DEFINITE OFFERS?

Ans.: It depends


1. It is appears o be a definite offer containing all the specific particulars needed in the contract, it really is a definite offer.

Example: “For Sale: 900 sq. meter lot with a brand new 1-1/2 storey house at 1445 Perdigon, Paco, manila for P10M cash” This is a definite offer, from which the advertiser cannot back out, once it is accepted by another.

2. If important details are left out, the advertisement is of a definite offer, but a mere invitation to make an offer.

Example: “For Sale: 1000sq, mere lots at P100M toP150M a lot at south Forbes Park Tel.88-00-00.” This is clearly an invitation o make an offer, which the advertiser is free to accept or to reject.

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.

Advertisements for bidders:

General Rule: The advertiser is not bond to accept the highest or lowest bidder.

Problem:

1. In an advertisement for bidders, there was NO reservation by the advertiser that he could reject any and all bids. Now then, is he still given the right to reject event the highest bidder (as when the offer is to sell) or the lowest bidder (as when his offer is to buy?

Ans.: YES, for the rule is hat “the advertiser is ot bound to accept the highest or lowest bidder, unless the contrary appears”.

Acceptance of a Bid ---- The mere determination of a public official or board to accept the proposal of a bidder does of constitute a contract; the decision must be communicated to the bidder.

2. In an advertisement for bidders, it was stated that the award should be given not to the LOWEST BIDDER, not to the lowest responsible bidder but to the lowest and best bidder.

Ans.:1. The “Lowest Bidder” is he who that offers the lowest price.


2. The lowest responsible bidder includes not only financial ability, but also the skill and capacity necessary to complete the job for which the bidder would become responsible.

3. The lowest and responsible bidder includes not only financial responsibility, skill and capacity, but also the reputation of the bidders for dealing fairly and honestly with the government, their mechanical facilities, and business organization tending to show dispatch in their work and harmonious relations with the government, the magnitude or urgency of the job, the kind and quality of materials to be used, and other factors as to which a bidder may offer greater advantages than the other.

Bids at Execution of Sales

In n execution of sale of properties attached for the payment of debts, it is generally understood that the property should be given to the highest bidder.

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.

* see Art. 38* Unemancipated minors cannot enter into valid contracts, and contracts entered into by them are not binding upon them, unless upon reaching majority they ratify the same.* Insane persons: It is not necessary that there be a previous of declaration of mental incapacity in order that a contract entered into by a mentally defective person may be annulled; it is enough that the insanity existed at the time the contract was made.

* Being deaf-mute is not by itself alone a disqualification for giving consent. The law refers to the deaf-mute who does not know how to write.

2 Classes of Voidable Contracts1. Those where 1party is incapacitated to give consent.2. Those were the consent of 1party has been vitiated (such as by error,

fraud, violence, intimidation, and undue influence).

NOTE: These contracts in general are valid until annulled ;however, annulment cannot prosper when they have been ratified.

Person Incapacitated to Consent: (IUD)1. Insane or demented persons, drunks or hypnotized2. Unemancipated Minors3. Deaf-mutes who do not know how to read and write

NOTE: If they know how to read, but do not know how to write, it is submitted the contract is valid, for then they are capable of understanding, and therefore capacitated to give consent.


UNEMANCIPATED MINORS ---- these are minors who have not been emancipated by marriage, attainment of the age of majority, or by parental or judicial authority.

NOTE: The state by virtue of the principle of PARENTS PATRIAE is oblige to minimize the risk to those who, because of their minority are as yet unable to take care of themselves fully. This prerogative of PARENTS’ PATRIAE is inherent in supreme power of every state.

In General, the Contracts which they enter into are VOIDABLE UNLESS:1. Upon reaching the age of majority, they ratify the same.2. They were entered THRU a GUARDIAN, and the COURT having

jurisdiction had approved the same.3. They were contracts of life insurance in favor of their parents, spouse,

children, brothers, sisters and provided, furthermore, that the minor is 18 years old or above.

4. They were in the form of savings account in the Postal Savings Bank, provided furthermore that the minor was at least 7 yrs. Old.

5. They were contracts of necessities such as food, but here the people who are legally bound to give them support should pay therefore.

6. They were contracts were the m minors misrepresented his age, and pretended to be one of the major age and is thus in ESTOPPEL.

7. Married minors can validly alienate or encumber personal property without parental consent, but in the case of the real property or if they want to borrow money, they need such parental consent, without which the transaction is voidable.

8. If both parties to a contract are MINORS, the contract is UNENFORCEABLE.

INSANE OR DEMENTED PERSONS(Unless they acted during a lucid interval)

1. Reason: People who contract must know what they are entering into.2. No proper declaration of insanity by the court is required, as long as it

is shown that at the time of contracting, the person was really insane.3. Even if a person had already been declared insane, this does not

necessarily mean that at the time of contracting, same person was still insane.

4. If the contract was made before the declaration of insanity, the presumption is that he was still SANE at the time of contacting. He who alleged the insanity of the other at the time of contracting is duty bound the same, otherwise, the latter’s capacity be presumed.

DEAF-MUTES WHO DO NOT KNOW HOW TO WRITE AND READ1. Formerly, a deaf-mute was presumed to be an idiot.2. If the deaf-mute does not know how to write but he knows how to read,

he should be considered capacitated.


PERSONS SPECIALLY DISQUALIFIEDThere are people who are specially disqualified in certain things. Here,

the transaction is VOID because the right itself is restricted, that is, the right is WITHHELD.

In the case of mere LEGAL INCAPACITY, the transaction is VOIDABLE because the right itself is not restricted, but merely its EXERCISE, that is, it can still be exercised but under certain conditions, such as when the parent of unemancipated minor CONSENT.

EXAMPLES OF PERSONS SPECIALLY DISQUALIFIED:

1. As a general rule, the husband and wife cannot sell to each other, nor can they donate each other. Violations are considered VOID CONTRACTS, but only those prejudiced can assail the validity of the transaction.

2. INSOLVENTS before they are discharged cannot, for example make payments.

3. Persons disqualified because of FIDUCIARY RELATIONSHIP, such as the guardians who are not allowed to purchase the property of his ward; or judges, with reference to the property under litigation.

4. Contracts entered into with non-Christians (except contract of personal service and the barter of sale of property) are VOID unless approved by the governor.

Art. 1328. Contracts entered into during a lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. *The use of intoxicants does not necessarily mean a complete loss of understanding. The same may be said of drugs. But a person, under the influence of superabundance of alcoholic drinks or excessive use of drugs, may have no capacity to contract.*In hypnotism and somnambulism, the utter want of understanding is a common element.

SOME CONTRACTS VOIDABLE BY REASON OF INCAPACITY:1. Insane or demented persons2. Those in state of drunkenness3. Those entered into during hypnotic spell (induced by drugs, or by

deliberate or unintentional hypnotism), somnambulism, for these cases, a person is incapable of intelligent consent.

LUCID INTERVALS Even if a person has already been judicially declared insane, and is actually now under guardianship, he may still enter into a valid contract,


provided that it can be shown that at the time of contracting, he was in a lucid interval. Of course here, he is already presumed insane, and therefore the sanity must be proved.

Art. 1329. 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.

* The Rules of Court provide a list of incompetents who need guardianship:1. persons suffering from the penalty of civil interdiction2. hospitalized lepers, 3. prodigals,4. deaf and dumb who are unable to write and read, 5. those of unsound mind (even though they have lucid intervals),6. persons not being of unsound mind but by reason of age, disease, weak mind,7. other similar causes cannot, without outside aid, take care of themselves and manage their property—becoming an easy prey for deceit and exploitation.

MODIFICATION RE INCAPACITY1. For a discussion of SPECIAL DISQUALIFICATION (see no.7 & 8)2. Regarding contracts entered y non- Christians, approvalby the officisld

concerened is required even if BOTH parties are non- Christians because both imposition and fraud re still possible in this case.

Problem:

If a hospitalized leper or a very old man has not been placed under guardianship, may hestill enter int0o a binding contract?

Ans.:YES, because he would still be presumed capacitated to enter a contract (although classified as incompetent)

If it can be shown that intelligent consent was absent, the contarct can be considered VOIDABLE.

* The incapacity to give consent (Arts. 1327 & 1328) to contracts renders the contract merely voidable, while special disqualification (Art. 1329) makes it void.

Art. 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.

CAUSES OF VITIATED CONSENT/VICES OF CONSENTVIMFU


1. Violence2. Intimidation3. Mistake (Error)4. Fraud (Deceit) 5. Undue Influence

NATURE OF THE VOIDABLE CONTRACT

A voidable contract is binding and valid, unless annulled by a proper action in court. It is , however, susceptible of ratification before annulment(Art. 1390). Annulment may be had even if there be no damage to the contracting parties.

CLEAR AND CONVINCING EVIDENCE ON THE DAMAGE TO THE CONTRACTING PARTIES:

There must be clear and convincing evidence of the presence of vitiated consent. Mere preponderance of evidence on this matter is not sufficient.

Art. 1331. In order that mistake may invalidate consent, it should refer to the substance of the thing which is the object of the contract, or to those conditions which have principally moved one or both parties to enter into the contract.

Mistake as to the identity or qualifications of one of the parties will vitiate consent only when such identity or qualifications have been the principal cause of the contract. A simple mistake of account shall give rise to its correction.

* Ignorance and error are 2 different states of mind.

IGNORANCE -- the complete absence of any notion about a particular matter,

ERROR or MISTAKE -- a wrong or false belief about such something.

* Annulment of contract on the ground of error is limited to cases in which it may reasonably be said that without such error the consent would not have been given.

* An error as to the person will invalidate consent when the consideration of the person has been the principal cause of the same.


* Mistake as to qualifications, even when there is no error as to person, is a cause vitiating consent, if such qualifications have been the principal cause of the contract.* A mistake as to the motive of a party does not affect the contract; to give it such effect would destroy the stability of contractual relations. When the motive has, however, been expressed and was a condition of the consent given, annulment is proper—because an accidental element is, by the will of the parties, converted into a substantial element.

REQUISITE FOR MISTAKE TO VITIATE CONSENT

A. The error must be substantial regarding:a. Object of the contractb. Conditions which principally moved or induced one of the parties

(error in quality – or in quantity – error in qualitate or in quantitate).

c. Identity or qualifications (error in personae), but only if such was the principle cause of the contract.

B. The error must be excusable (not caused by negligence)C. The error must be a mistake of fact, and not of law.

SUBSTANTIAL ERROR

The error is substantial if because of it, the party gave his consent. Therefore, if a party would still have entered into the contract even if he had known error, the error is NOT substantial.

ERROR REGARDING THE OBJECT OF THE CONTRACT

Example: A person signed a contract of sale thinking it was only a contract of loan.

ERROR REGARDING THE CONDITIONS THAT PRINCIPALLY INDUCED THE PARTY TO ENTER INTO THE CONTRACT:

Example: Error in knowledge about the true boundaries of parcel of land offered for sale. (mariano v. Linton)

Note: Error as to personal motive does not vitiate consent.Example: A boy buys an engagement ring in the false belief that his girl loves him.

ERROR IN QUALITY:Example: A person desiring to buy land consisting of 100 hectares discovers that the land has only 60 hectares.


Note: A simple mistake has to account, caused for example by wrong arithmetical computation, would ordinarily give rise merely to correction, would ordinarily give rise merely to correction, and not annulment of the contract.

Example:

If A bought 10 notebooks at P5.20 each, and mistakenly the contract showed a total value of P55 instead of P52, this is merely an error of computation, an error in account, and will therefore require only correction. But even here, had the seller sold the notebooks only because he thought he would get P55, the amount he needed badly (and would not have sold had a lesser price been offered), this would be not a mere error of account, but truly a substantial error in quantity.

ERROR IN IDENTITY OR IN QUALIFICATIONS

This vitiates consent only when such identity or qualifications have been the principal cause of the contract.

Examples:

Hiring of a pre-bar reviewer, a particular singer for a concert, contracts involving partnership, agency, deposit – since these require trust and confidence.

EXCUSABLE ERROR

The error does not vitiate consent if the party in error was negligent, or if having had an opportunity to ascertain the truth, he did not do so. Moreover, there is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. Error as to how much profit a person can make because of the transaction cannot annul the contract because in many cases, this is merely speculative.

ERROR OF FACT NOT OF LAW

The error must be one of fact, not of law. This is because ignorance of the law does not excuse anyone from compliance therewith. Thus, if one sells property in the false belief that conjugal property could be partitioned during a marriage, the sale cannot be annulled. Error of law, however, on a doubtful or difficult question can exist together with good faith.

NOTE: Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated may vitiate content. “Legal Effect” refers to the RIGHTS of the parties as stated in the legal provisions.


Art. 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former.

RULE IN CASE OF INABILITY TO READ OR UNDERSTAND:This rule is especially necessary in the Phil. where unfortunately there is still a

fairly large number of illiterates, and where documents are usually drawn up in English or Spanish.

PRESUMPTION: The natural presumption, of course, is that one always acts with due care and signs with full knowledge of all the document. And this is true even if the mind of the party signing was confused at the time of signing, as long as he still knew what he was doing. He, thus, cannot repudiate the transaction.

WHEN PRESUMPTION DOES NOT APPLY:

1. When one of the parties is unable to read (including blind)2. If the contract is in language not understood by one of the parties.

Art. 1333. There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.

KNOWLEDGE OF DOUBT OR RISK DOES NOT VITIATE CONSENTt is assumed here that the party was willing to take the risk. This is particularly

true in contracts which are evidently aleatory in nature.

EXAMPLE: A bought a fountain pen which was represented as possibly being able to write even underwater. A also knew that the pens’s ability was questionable , and yet A bought said pen. Here, A cannot allege mistake since he knew beforehand of the doubt, risk, or contingency affecting the object of the contract.MISTAKE CAUSED BY INEXCUSABLE NEGLIGENCE, THE CONTRACT BE ANNULED.

---- If mistake is caused by inexcusable negligence, the contract cannot be annulled.

To invalidate consent, the error must be excusable. It must be a real error and not one that could have been avoided by the party alleging it. The error must arise from facts unknown to him. A mistake that is caused by manifest negligence cannot invalidate a juridical act.

Art. 1334. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated may vitiate consent.


REUISITES FOR MUTUAL ERROR TO VITIATE CONSENT (REM)

1. Real Purpose of the parties is frustrated2. Error must be as to the legal effect of an agreement3. Must be mutual

EXAMPLE: A and B entered into a contract, which they intended should result in a co-ownership between them, but which turned out later to be a mortgage, as a result, as the result of their mutual error as to the legal effect of the agreement. Here the contract is voidable.

Reason for Art. 1334:

Mistake of law does not generally vitiate consent, BUT, when there is a mistake on a doubtful question of law, on the construction or application of law, this is analogous to a mistake of fact, and the maxim ‘IGNORANTIA LEGIS NEMINEM EXCUSAT’ should have no other application.

DISTINGUISHED FROM THE REMEDY OF REFORMATION

This article must be distinguished from Art. 1361 where the remedy is REFORMATION, NOT ANNULMENT. Thus article 1361 of the Civil Code reads: “ When a mutual mistake of the parties causes the failure of the instrument to disclose their real agreement, said instrument may be reformed.

NOTE : Art. 1361 – the real agreement is not disclosed. Art. 1334 - The error is as to legal effect of the agreement.

Example:

A and B agreed on sale, but as written, the document shows a mortgage. Here, there was a meeting of the minds, but the instrument does not show the real intention. Hence, the remedy is REFORMATION. If on the other hand, both agreed on a sale, but both parties thought erroneously that it had the same effects as mortgage, there is no meeting of the minds, and the REMEDY is ANNULMENT.

* The legal effects include the rights and obligations of the parties, not as stipulated in the contract, but as provided by the law. The mistake as to these effects, therefore, means an error as to what the law provides should spring as consequences from the contract in question.


Art. 1335. There is violence when in order to wrest consent, serious or irresistible force is employed.

There is intimidation 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.

To determine the degree of intimidation, the age, sex and condition of the person shall be borne in mind. A threat to enforce one's claim through competent authority, if the claim is just or legal, does not vitiate consent.

VIOLENCE AND INTIMIDATION:

Violence --- refers to physical condition; intimidation, to moral coercion.

Example: If a person signs a contract only because a gun is pointed at him, this is INTIMIDATION because he is afraid he would be killed. But if he signs because his left hand is being twisted painfully, there is violence or force.

REQUISITE FOR VIOLENCE TI VITIATE CONSENT

1. Employment of serious or irresistible force.2. Reason why the contract was entered into.

REQUISITES FOR INTIMIDATION TO VITIATE CONSENT

*Duress is that degree of constraint or danger either actually inflicted (violent) or threatened and impending (intimidation), sufficient to overcome the mind and will of a person of ordinary firmness.

* Violence refers to physical force or compulsion, while intimidation refers to moral force or compulsion.

Requisites for intimidation to vitiate consent.

1. Reasonable and well-grounded fear2. Of an imminent and grave evil3. Upon his person, property, or upon the person or property of his

spouse, descendants, or ascendants.4. Must have been the reason why the contract was entered into.5. The threat must be of an unjust act, an actionable wrong.

REASONABLE AND WELL - GROUNDED FEAR


1. Whether the fear is reasonable and well grounded or not depends upon many circumstances, including the age, condition, and sex of the person concerned.

2. The duress or intimidation must be more than the “general feeling of fear”.

3. When those who threatened have power, and when maltreatment has accompanied the threat. The feat is not a well rounded when the person who threatened for instance to initiate expropriation proceedings by the government, if the other party would not consent, is in no position to accomplish the same.

IMMINENT AND GRAVE EVIL

This depends also on the circumstances, particularly, the age, sex, or condition of the person threatened. Thus exposure of a public official’s nightly indiscretions or immoralities is more serious to him than threat is to a common day laborer.

NATURE OF THE THREAT ON A PERSON AND PROPERTY OF THE PERSONS ENUMERATED:

1. It is believed that threat to honor, chastity, and dignity maybe classified under threat to “person”.

2. Query: Is the enumeration of persons exclusive in that a threat, for example to the life of one’s fiancée, is not considered intimidation? It is submitted that the provision must be liberally interpreted for indeed consent here is vitiated just the same.

THREAT OF AN UNJUST ACT OR ACTIONABLE WRONG1. If a man marries a girl who threatened to report him to the courts for

immorality, and thus prevents his admission to the bar, the marriage cannot be annulled on the ground of intimidation because here the girl had the legal right to do what she threatened.

2. A threat to prosecute unless the debtor signs contract is not intimidation.

3. If a debtor consents to pay under a threat of a recourse to the courts, the expenses of litigation, he cannot maintain that his consent was vitiated; But it will be otherwise if, passing beyond the limits of his rights, a creditor has exacted from a debtor with this same legal threats, a novation of the contract or a confession of a larger indebtedness.

4. The right to enforce one’s claim thru competent authority must Not by itself constitute an unlawful act.

Example: A witness to a crime threatens to report the criminal gives money to him. This is a clear case of black mail.


REVERENTIAL FEAR:

If a contract is signed merely because of “fear of displeasing persons to whom obedience and respect are due”, the contract is still valid, for by itself reverential fear is not wrong.

The following circumstances shall be considered:

1. confidential, family, spiritual and other relations between the parties,2. fact that the person alleged to have been unduly influenced was

suffering from mental weakness, 3. Ignorant or in financial distress.

* In intimidation, there must be an unlawful or unjust act which is threatened and which causes consent to be given, while in undue influence there need not be an unjust or unlawful act. In both cases, there is moral coercion.

*Moral coercion may be effected through threats, expressed or implied, or through harassing tactics.

*Undue influence is any means employed upon a party which, under the circumstances, he could not well resist, and which controlled his volition and induced him to give his consent to the contract—which otherwise he would not have entered into.

Art. 1336: Violence or intimidation Caused by 3rd person shall annul the obligation, although it may have been employed by a 3rd person who did not take part in the contract.

Violation or Intimidation Caused by third personEven if a third person exercised the violence or intimidation, the

contract maybe annulled. This is because the consent is still vitiated.

Art. 1337: There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The following circumstances shall be considered: the confidential, family, spiritual and other relations between the parties, or the fact that the person alleged to have been unduly influenced was suffering from mental weaknesses, or was ignorant or in financial distress.

REQUISITE TO UNDUE INFLUENCE TO VITIATE CONSENT: (DIP)

1. Deprivation of the latter’s will of a reasonable freedom of choice2. Improper advantage3. Power over the will of another


EXAMPLES OF CIRCUMSTANCES TO BE CONSIDERED:

1. Confidential, family, spiritual, and other relations between the parties2. Mental weakness3. Ignorance4. Financial Distress

UNDUE INFLUENCE CAUSED BY THIRD PERSONUndue influence exercised by a third part vitiates consent, just like in

the case of violence and intimidation.

CONTRACTS OF ADHESION:Contracts where 1 party merely signs carefully prepared contracts by

big companies. Should be strictly interpreted against the company, and liberally in favor of the individual is “usually helpless to bargain for better terms.

Art. 1338. There is fraud when, through 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. (1269)

*Fraud is every kind of deception, whether in the form of insidious machinations, manipulations, concealments, or misrepresentations, for the purpose of leading another party into error and thus executing a particular act.

* Fraud produces qualified error; it induces in the other party an inexact notion of facts. The will of another is maliciously misled by means of false appearance of reality.

*“Insidious words or machinations” include 1. false promises; 2. exaggeration of hopes or benefits; 3. abuse of confidence; and 4. fictitious names, qualifications, or authority.

* KINDS OF FRAUD:

A. FRAUD IN CELEBRATION OF THE CONTRACT

1) dolo causante or causal fraud — which determines or is the essential cause of the consent; fraud in the perfection of contract


This is the use of insidious words and machinations by one of the contracting parties to induce the other party to enter into the contract, which, without them, he would not have agreed to.

REQUISITES OF DOLO CAUSANTE:1. The fraud must be material and serious, that is really induced the

consent.2. The fraud must have been employed by only one of the contracting

parties, because if both committed fraud, the contact would remain valid.

3. There must be a deliberate intent to deceive or induce; therefore, misrepresentation in GOOD FAITH is not fraud.

4. The other party must have relied on the untrue statement, and must himself not be guilty of negligence in ascertaining the truth.

MATERIAL AND SERIOUS FRAUD:

1. A wanted to have himself insured, but because he was afraid he could not pass the medical examination, he had another person examined in his place. Here the contract of insurance is voidable.

2. Concealment by the applicant for insurance that he had suffered from a number of ailment, including incipient pulmonary tuberculosis, and of the name of the hospital and of the physician who had treated him.

3. Misrepresentation by the vendor of the boundaries of his land by showing valuable properties not really included in his title.

4. Misrepresentation of law5. The mere insertion of the deed of sale that the vendor is married when

as a matter of fact he is not, is NOT sufficient evidence of fraud if this fact was not the inducing factor that led to the sale.

6. When a married man conceals deliberately his marriage so as to be able to carnally have another girl and the latter is forced to give up her employment because of such family trouble, he commits actual fraud upon her, and should therefore, liable for damages.

2) dolo incidente or incidental fraud which does not have such a decisive influence and by itself cannot cause the giving of consent, but refers only to some particular or accident of the obligation. *Dolo causante can be a ground for annulment; dolo incident cannot be a ground for annulment.

*The result of fraud is error on the part of the victim.

B. Fraud in the performance of the obligations stipulated in the contract.


Art. 1339. Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud.

FAILURE TO DISCLOSE FACTS:1. Failure to disclose facts (concealment) constitute fraud, when there is

a duty to reveal them.2. There is a duty to reveal in the following cases for example: When the

*Silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts, or unless according to good faith and the usages of commerce, the communication should be made.

*Thus, the innocent non-disclosure of a fact does not affect the formation of the contract or operate to discharge the parties from their agreement.

Opponents in litigation

There would seem to be no duty to disclose facts, as between opponents in litigation for their relations, far from being friendly or confidential, are openly antagonistic.

Art. 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent.

USUAL EXAGGERATION:1. This article stresses the rule of “ covet emptor” ( let the buyer beware)

Covet emptor ---- a buyer must be on his guard. It is his duty to check the title of the seller; otherwise the buyer gets the object at his own risk.

2. The “usual exaggerations in trade” (dealer’ talk) constitute tolerated fraud, when the other party had an opportunity to know the facts.

3. The law according to the supreme court (Songco vs. Sellner), allows considerable latitude to seller’s statement or dealer’s talk; “and experience teaches that is exceedingly risky to accept it at its face value”. He must therefore take the consequences of his own imprudence.

4. What does not appear on the face of the written contract should be regarded as “traders talk” or “dealer’s talk.

*Tolerated fraud includes minimizing the defects of the thing, exaggeration of its good qualities, and giving it qualities that it does not have. This is lawful misrepresentation known as dolus bonus. This is also called lawful astuteness.

*These misrepresentations are usually encountered in fairs, markets, and almost all commercial transactions. They do not give rise to an action for


damages, either because of their insignificance or because the stupidity of the victim is the real cause of his loss.

*The thinking is that where the means of knowledge are at hand and equally available to both parties, one will not be heard to say that he has been deceived.

Art. 1341. A mere expression of an opinion does not signify fraud, unless made by an expert and the other party has relied on the former's special knowledge.

An opinion of an expert is like a statement of fact, and if false, may be considered a fraud giving rise to annulment.

MERE EXPRESSION OF AN OPINION1. EXAMPLE: A, on buying a watch, was assured by a seller that it was a

good watch, and could run without rewinding for 1 week, in the opinion of the seller. This is a mere expression of opinion that is not fraudulent. But if the seller is the watch expert, and the only reason why A bought the watch was this opinion of the seller, the contract is voidable on the ground of fraud.

2. If a seller says that in his opinion his land is first class, but it turns out to be second class, the sale is not fraudulent, particularly when the buyer had opportunity to examine the land for himself.

3. Reason for the rule of an expert opinion. --- The opinion of the expert is almost in the same category as a fact, particularly when expert’s knowledge is relied upon by the other party.

PROBLEM:

X, during to buy certain property, hired an expert to ascertain its true value. But the expert’s opinion turned out to be wrong and X as , therefore, misled. May X ask for the annulment of the contract?

Ans. ; No, because his own expert ( there his employee) committed the error.

Art. 1342. Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual.

*The general rule is that the fraud employed by a third person upon one of the parties does not vitiate consent and cause then nullity of a contract.

MISREPRESENTATIOM BY A THIRD PERSON:

1. For or intimidation by a third person makes the contract voidable.


2. Fraud by a third person does not make the contract voidable unlessa. The representation has created substantial mistakeb. The mistake is mutual.

*Exception: If one of the parties is in collusion with the third person, or knows of the fraud by the third person, and he is benefited thereby, he may be considered as an accomplice to the fraud, and the contract becomes voidable.

Art. 1343. Misrepresentation made in good faith is not fraudulent but may constitute error.

MISREPRESENATATION MADE IN GOOD FAITH Example: A bought a certain article from B. The article was needed for A’s radio. honestly but mistakenly assured A that the article was the proper object. May the contract be annulled?

Ans.: YES, not on the grround of fraud, for the representation was honest, but on the ground of substantial error.

Art. 1344. In order that fraud may make a contract voidable, it should be serious and should not have been employed by both contracting parties. Incidental fraud only obliges the person employing it to pay damages.

REQUISITES FOR FRAUD TO VITIATE CONSENT ( Ground for annulment)1. The fraud must be serious2. The parties must not be in pari delicto (mutual guilt), otherwise,

neither pary may ask for annulment. The contract would, therefore, be considered valid.

*Fraud is serious when it is sufficient to impress or to lead an ordinarily prudent person into error; that which cannot deceive a prudent person cannot be a ground for nullity.

*Besides being serious, the fraud must be the determining cause of the contract. It must be dolo causante.

*When both parties use fraud reciprocally, neither one has an action against the other; the fraud of one compensates that of the other. Neither party can ask for the annulment of the contract

INCIDENTAL FRAUD DOES NOT VITIATE CONSENTIncidental fraud should not be confused with causal fraud. Incidental

fraud is not a cause for annulment.


Art. 1345. Simulation of a contract may be absolute or relative. The former takes place when the parties do not intend to be bound at all; the latter, when the parties conceal their true agreement.

* Simulation is the declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purposes of deception, the appearance of a juridical act which does not exist or is different from that which was really executed.

REQUISUITE FOR SIMULATION1. An outward declaration of will different from the will of the parties.2. The false appearance must have been intended by mutual agreement.3. The purpose is to deceive third person.

Art. 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does not prejudice a third person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties to their real agreement..

*In absolute simulation, there is color of a contract, without any substance thereof, the parties not having any intention to be bound.

KINDS OF SIMULATED CONTRACTS1. Absolutely simulated fictitious contracts

a. The parties do not intend to be boundb. Effect: the contract is void

2. Relatively simulated disguised contractsa. The parties conceal their true agreement.b. Effect: The parties are bound to the real or true agreement

expect a. If the contract should prejudice a third personb. If the purpose is contrary to law, public order, good

morals, good customs or public policy.Absolutely Simulated:

As a joke, A ands B executed a deed of sale although they did not intend to be bound at all by the contract.

Note: An absolutely simulated contract is inexistent and void. *In relative simulation, the parties have an agreement which they conceal under the guise of another contract. Example: a deed of sale executed to conceal donation.

SECTION 2. - Object of Contracts


Art. 1347. All things which are not outside the commerce of men, including future things, may be the object of a contract. All rights which are not intransmissible may also be the object of contracts.

No contract may be entered into upon future inheritance except in cases expressly authorized by law.

All services which are not contrary to law, morals, good customs, public order or public policy may likewise be the object of a contract.

The object of a contract is its subject matter. It is the thing, right, or service which is the subject-matter of the obligation arising from the contract.

Requisites: (CLILD)

1. [C] within the commerce of man;

2. [I] transmissible

3. [L] must be licit, or not contrary to law, morals, good customs, public policy, or public order;

4. [I]not be an impossible thing or service; and4) [D] it must be determinate as to its kind.5. Must be determinate as to its kind or determinable without the need of a new contract or agreement.

* Things which are outside the commerce of man:

1.Services which imply an absolute submission by those who render them, sacrificing their liberty, their independence or beliefs, or disregarding in any manner the equality and dignity of persons, such as perpetual servitude or slavery;

3. Personal rights, such as marital authority, the status and capacity of a person, and honorary titles and distinctions;

4. Public offices, inherent attributes of the public authority, and political rights of individuals, such as the right of suffrage;

5. Property, while they pertain to the public dominion, such as the roads, plazas, squares, and rivers;


6. Sacred things, common things, like the air and the sea, and res nullius, as long as they have not been appropriated.

7. Even future things can be the object of contracts, as long as they have the possibility or potentiality of coming into existence.

8. The law, however, generally does not allow contracts on future inheritance. A contract entered into by a fidei commissary heir with respect to his eventual r ights would be val id provided that the testator has already died. The r ight of a fideicommissary heir comes from the testator and not from the fiduciary.

Art. 1348. Impossible things or services cannot be the object of contracts.

1. Things are impossible when they are not susceptible of existing, 2. Outside the commerce of man. 3. Personal acts or services impossible when they beyond the ordinary

strength or power of man.

*The impossibility must be actual and contemporaneous with the making of the contract, and not subsequent thereto.

The impossibility is absolute or objective when nobody can perform it; it is relative or subjective when due to the special conditions or qualifications of the debtor it cannot be performed.

*The absolute or objective impossibility nullifies the contract; the relative or subjective does not.

IMPOSSIBLE THINGS OR SERVICES.

1. Because of the nature of the transaction or because of the law.2. Absolute (objectively impossible) (here, NO ONE can do it.3. Relative (subjectively impossible) (here, the particular debtor cannot

comply.

Art.1349.The object of every contract must be determinate as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is


possible to determine the same, without the need of a new contract between the parties.

*The thing must have definite limits, not uncertain or arbitrary.

*The quantity of the of the object may be indeterminate, so long as the right of the creditor is not rendered illusory.

SECTION 3. - Cause of Contracts

*The cause of the contract is the “why of the contract,” the immediate and most proximate purpose of the contract, the essential reason which impels the contracting parties to enter into it and which explains and justifies the creation of the obligation through such contract.

*The cause as to each party is the undertaking or prestation to be performed by the other. The object of the contract is the subject matter thereof (e.g., the land which is sold in a sales contract). Consideration, meanwhile, is the reason, motive, or inducement by which a man is moved to bind himself by an agreement.

*Requisites:

1) it must exist;2) it must be true; 3) it must be licit.

Art. 1350. In onerous contracts the cause is understood to be, for each contracting party, the prestation or promise of a thing or service by the other; in remuneratory ones, the service or benefit which is remunerated; and in contracts of pure beneficence, the mere liberality of the benefactor. (1274)

* In onerous contracts, the cause need not be adequate or an exact equivalent in point of actual value, especially in dealing with objects which have a rapidly fluctuating price. There are equal considerations.

* A remuneratory contract is one where a party gives something to another because of some service or benefit given or rendered by the latter to the former, where such service or benefit was not due as a legal obligation. The consideration of one is greater than the other’s.

*A gratuitous contract is essentially an agreement to give donations. The generosity or liberality of the benefactor is the cause of the contract. There is nothing to equate.


Art. 1351. The particular motives of the parties in entering into a contract are different from the cause thereof.

* Cause is the objective, intrinsic, and juridical reason for the existence of the contract itself, while motive is the psychological, individual, or personal purpose of a party to the contract.

* As a general principle, the motives of a party do not affect the validity or existence of a contract.

Exceptions: When motive predetermines the purpose of the contract, such as:

*When the motive of a debtor in alienating property is to defraud his creditors, the alienation is rescissible;

* When the motive of a person in giving his consent is to avoid a threatened injury, as in the case of intimidation, the contract is voidable; and*When the motive of a person induced him to act on the basis of fraud or misrepresentation by the other party, the contract is voidable.

Art. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The cause is unlawful if it is contrary to law, morals, good

customs, public order or public policy. (1275a)Art. 1353. The statement of a false cause in contracts shall render them void, if it should not be proved that they were founded upon another cause which is true and lawful. (1276)Where the cause stated in the contract is false, the latter may nevertheless be sustained by proof of another licit cause.

Art. 1354. Although the cause is not stated in the contract, it is presumed that it exists and is lawful, unless the debtor proves the contrary. (1277) Unless the contrary is proved, a contract is presumed to have a good and sufficient consideration. This presumption applies when no cause is stated in the contract. Art. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a contract, unless there has been fraud, mistake or undue influence.


* In case of lesion or inadequacy of cause, the general rule is that the contract is not subject to annulment

.* In cases provided by law, however, such as those mentioned in Art 1381, the lesion is a ground for rescission of the contract.

* Gross inadequacy naturally suggests fraud and is evidence thereof, so that it may be sufficient to show it when taken inconnection with other circumstances.

DEFECTIVE CONTRACTS:

1. Resciccible2. Voidable3. Unenforcible4. Void5. Inexistent

Valid and enforceable until rescinded;

there is a sort of extrinsic defect consisting of economic damage or lesion

Valid and enforceable until annulled; The defect is more or less intrinsic Validable transaction; Cannot be enforce unless ratified Does not and cannot produce legal effect

Causes:injury or damage to one of the parties or to third persons GAFLAI – Arts. 1381 – 1382]

Causes: (Art. 1390)- legal incapacity of one party; o r- vitiation of consent

Causes: (Art. 1403)-

1. contract is entered into in excess or without authority-

2. non-compliance with Statute of Frauds

3. Legal incapacity of both Causes:(void) illicit,

4. prohibited or declared by law as void(inexistent)

5. lacks one or all of the requisites of a contract (– Art. 1409]

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