TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS
1. Essential Requisites (Art. 1261) 2. Kinds of Contracts
A. Consensual B. Real
C. Formal or solemn
C.1. Donations (Arts. 748-749) C.2. Partnership where real
property contributed (Arts. 1771, 1773)
C.3. Antichresis (Art. 2134)
C.4. Agency to sell real property or an interest therein (Art. 1874) C.5. Stipulation to charge interest (Art. 1956)
C.6. Stipulation limiting common carrier’s duty of extraordinary diligence to ordinary diligence (Art. 1744)
C.7. Chattel mortgage C.8. Sale of large cattle
3. Formality (Arts. 1356, 1357, 1358) 4. Reformation of Contracts
5. Interpretation of Contracts 6. Defective Contracts
A. Rescissible contracts (Art. 1381) A.1. Difference with rescission (resolution) under Art. 1191 B. Voidable contracts (Arts. 1328-1344, 1390-1402)
C. Unenforceable contracts (Arts.
1403-1408, 1317)
D. Void contracts (Arts. 1409, 1346) (1) Pactum commissorium (Arts.
2088, 2130, 1390)
(2) Pactum de non alienando (Art.
2130)
(3) Pactum leonine (Art. 1799)
7. Effect of contracts (Art. 1311)
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TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 1. Essential Requisites
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1. ESSENTIAL REQUISITES ESSENTIAL ELEMENTS:
1. Consent 2. Subject Matter 3. Consideration A. CONSENT
CONSENT – meeting of minds between parties on subject matter and cause of contract;
concurrence of offer and acceptance REQUIREMENTS :
1. Must be manifested by the concurrence of the offer and payment;
2. Parties are legally capacitate to enter into contracts
3. Consent must be intelligent, free, spontaneous, and real
AUTO CONTRACTS - made by a person acting in another’s name in one capacity
COLLECTIVE CONTRACTS - will of majority binds a minority to an agreement notwithstanding the opposition of the latter CONTRACTS OF ADHESION - one party has already a prepared form of a contract, containing the stipulations he desires, and he simply asks the other party to agree to them if he wants to enter into the contract
NOTE: We follow the theory of cognition and not the theory of manifestation.
Under our Civil Law, the offer and acceptance concur only when the offeror comes to know, and not when the offeree merely manifests his acceptance.
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OFFER – a proposal made by one party to another to enter into a contract; must be certain or definite, complete and intentional
ELEMENTS OF VALID OFFER / ELEMENTS OF VALID ACCEPTANCE
1. Definite--unequivocal 2. Complete--unconditional 3. Intentional
WHEN OFFER BECOMES INEFFECTIVE:
1. Death, civil interdiction, insanity or insolvency of either party before acceptance is conveyed
2. Express or implied revocation of the offer by the offeree
3. Qualified or conditional acceptance of the offer, which becomes a counter-offer
4. Subject matter becomes illegal or impossible before acceptance is communicated
ACCEPTANCE - manifestation by the offeree of his assent to the terms of the offer; must be absolute
NOTE: A qualified acceptance constitutes counter-offer
PERIOD FOR ACCEPTANCE 1. Stated fixed period in the offer 2. No stated fixed period
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 NOTE: Acceptance may be revoked before it comes to the knowledge of the offeror.
(withdrawal of offer)
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.
RULE ON COMPLEX OFFERS
1. Offers are interrelated – contract is perfected if all the offers are accepted 2. Offers are not interrelated – 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.
Offer inter praesentes must be accepted IMMEDIATELY. 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 prescribe by the offeror is NOT EFFECTIVE, BUT A COUNTER-OFFER which the offeror may accept or reject. Malbarosa v. CA, [G.R. No. 125761, April 30, 2003]
RULE ON ADVERTISEMENTS AS OFFERS Business advertisements – Not a definite offer, but mere invitation to make an offer, unless it appears otherwise
Advertisement for Bidders – only invitation to make proposals and advertiser is not bound to accept the highest or lowest bidder, unless appears otherwise
THE 4 THEORIES IN ACCEPTANCE OF OFFER BY TELEGRAM OR LETTER
1. Manifestation – perfected from the moment the acceptance is declared or made
2. Expedition – perfected from the moment the offeree transmits the notification of acceptance 3. Reception – perfected from the moment the offeror receives the letter
4. Cognition – perfected from the moment the acceptance comes to the knowledge of the offeror
NOTE: Contracts under the Civil Code generally adhere to the Cognition Theory while
transactions under the Code of Commerce use the Manifestation Theory.
When the offeror refuses to open the letter or telegram he is held to have a constructive notice of the contents thereof and will be bound by the acceptance of the offeree. (Jurado citing Castan) OPTION: option may be withdrawn anytime before acceptance is communicated but not when supported by a consideration other than purchase price: option money
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EFFECTS OF OPTION:
NOT supported by independent consideration – the offeror can withdraw the privilege at any time by communicating the withdrawal before acceptance
Supported by independent consideration – the offeror cannot withdraw his offer PERSONS WHO CANNOT GIVE CONSENT TO A
CONTRACT : 1. Minors
2. Insane or demented persons, unless the contract was entered into during a lucid interval
3. Illiterates/ deaf-mutes who do not know how to write
4. Intoxicated and under hypnotic spell
5. Art 1331 - person under mistake; mistake may deprive intelligence
6. Art 1338 - person induced by fraud (dolo causante)
NOTE: Dolus bonus (usual exaggerations in trade) are not in themselves fraudulent
RULE ON CONTRACTS ENTERED INTO BY MINORS
GENERAL RULE: VOIDABLE EXCEPTIONS:
a. Upon reaching age of majority – they ratify the same
b. They were entered unto by a guardian and the court having jurisdiction had approved the same
c. They were contracts for necessities such as food, but here the persons who are bound to give them support should pay therefor
d. Minor is estopped and cannot be absolved from the contract they
entered into for having
misrepresented his age and misled the other party through his active misrepresentation. Mercado vs.
Espiritu, [37 Phil 215] HOWEVER, minors can set up the defense of minority to resist the claim when there is only passive misrepresentation, as they did not disclose their minority because they had no juridical duty to disclose their inability. (Braganza vs.
De Villa Abrille, [105 Phil 456]
DISQUALIFIED TO ENTER INTO CONTRACTS:
(contracts entered into are void) 1. Those under civil interdiction 2. Hospitalized lepers
3. Prodigals
4. Deaf and dumb who are unable to read and 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 (Rule 92, Sec.2, Rules of Court)
INCAPACITY DISTINGUISHED FROM DISQUALIFICATION
INCAPACITY DISQUALIFICATION
Restrains the
exercise of the right to contract
Restrains the very right itself
May still enter into contract through parent, guardian or legal representative
Absolutely disqualified
Based upon
subjective
circumstance of certain person
Based upon public policy and morality
Contracts entered into are merely voidable
Contracts entered into are void
CAUSES WHICH VITIATE FREEDOM 1. Violence
REQUISITES
a. Irresistible physical force
b. Such force is the determining cause for giving consent
2. Intimidation
REQUISITES:
b. Determining cause for the contract c. Threatened act is unjust and unlawful d. Real and serious
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e. Produces a well grounded fear that the person making it will carry it over
Reluctant consent – a contract is valid even though one of the parties entered into it against his wishes and desires or even against his better judgment.
Contracts are also valid even though they are entered into by one of the parties without hope of advantage or profit. Martinez vs. Hongkong and Shanghai Bank, [15 Phil 252]
3. Mistake
Not only wrong conception of the thing but also the lack of knowledge with respect to it (Manresa)
Two General Kinds of Mistake:
a.Mistake of Fact – when one or both of the contracting parties believe that a fact exist when in reality it does not, or that such fact does not exist when in reality it does b.
Mistake of Law
General Rule: Mistake does not vitiate consent
Exception: Mutual error as to the effect of an agreement when the real purpose of the parties is frustrated
4. Fraud
When, through insidious words or machinations of 1 of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to.
KINDS:
o Causal Fraud (Dolo Causante)- Fraud in the PERFECTION of the contract
Deception of serious character, without which the other party would not have entered into
It is the cause which induces the party to enter into a contract
Renders the contract voidable. Insidious words or machinations are employed
Not employed by both or by third person
Ground for annulment
o I ncidental Fraud (Dolo Incidente)- Fraud in the PERFORMANCE of an obligation
Deception which are not serious and without which the other party would still have entered into the contract
It is not the cause which induced the party to enter into a contract
Renders the party liable for damages 5. 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
SIMULATED CONTRACTS
1. Absolute – no intention to be bound at all, fictitious only – void from beginning 2. Relative – there is intention to be
bound but concealed; concealed contract binds:
c. No prejudice to 3rd persons d. Not contrary to law, morals, etc.
B. OBJECT REQUISITES :
1. Within the commerce of man – either existing or in potency
2. Licit or not contrary to law, good customs 3. Possible
4. Determinate as to its kind or determinable w/o need to enter into a new contract
5. Transmissible
THINGS WHICH CANNOT BE THE OBJECT OF CONTRACT:
1. Things which are outside the commerce of men
2. Intransmissible rights
3. Future inheritance, except in cases expressly authorized by law
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4.
Services which are contrary to law, morals, good customs, public order or public policy
5. Impossible things or services
6. Objects which are not possible of determination as to their kind
C. CAUSE (CAUSA)
CAUSA- Immediate, direct and most proximate reason why parties enter into contract
REQUISITES:
1. It must exist 2. It must be true
CAUSE DISTINGUISHED FROM MOTIVE
CAUSE MOTIVE
Direct and most Indirect or remote
proximate reason of a contract
Cause us always same for each contracting party
The motive differs for each contracting party
Legality or illegality of cause affects the existence or validity of the contract
Legality or illegality of motive does not affect the existence or validity of contract
CAUSA IN SOME CONTRACTS:
1. Onerous contracts – the prestation of promise of a thing or service by the other 2. Remuneratory contracts – the service or
benefit remunerated
3. Pure Beneficence – mere liberality of the donor or benefactor
4. Accessory – identical with cause of principal contract, the loan which it derived its life and existence (ex: mortgage or pledge) Want of Cause - There is a total lack or absence of cause
Illegal Cause – The cause is contrary to law, morals, good customs, public order and public policy
False Cause – The cause is stated but it is not true
Moral Obligation as Cause
Where the moral obligation arises wholly from ethical considerations, unconnected with any civil obligations, it cannot constitute a sufficient cause or consideration to support an onerous contract. Fisher vs. Robb [69 Phil 101]
Where such moral obligation is based upon a previous civil obligation which has already been barred by the statute of limitations at the time when the contract is entered into, it constitutes a sufficient cause or consideration to support a contract Villaroel vs. Estrada 71 Phil 14]
A contract is a meeting of minds between two persons whereby one binds himself, with respect
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Void - produce no legal effect
ILLEGALITY OF CAUSA
Void - produce no legal effect
FALSITY OF
Presumed to Exist - burden of proof is on the person assailing its existence
INADEQUAC Y OF CAUSA
Does not Invalidate Contract per se
Exceptions:
* Fraud
* Mistake
* Undue influence
* Cases specified by law - contracts entered when ward suffers lesion of more than 25%
to the other, to give something or to render some service
CONTRACT DISTINGUISHED FROM
OBLIGATION
CONTRACT OBLIGATION One of the sources of
obligations
Legal tie or relation itself
There must be an obligation
There need not be a contract
CONTRACT DISTINGUISHED FROM
AGREEMENT
CONTRACT AGREEMENT Agreements
enforceable through legal proceedings
Cannot be enforced by action in courts of justice
Should have all the requisites of a contract
Need not have all the requisites There must be an
agreement
There need not be a contract
A. PRINCIPAL CHARACTERISTICS:
1. Autonomy of wills – parties may stipulate anything as long as not illegal, immoral, etc.
2. Mutuality – performance or validity binds both parties; not left to will of one of parties
3. Obligatory Force and Consensuality – parties are bound from perfection of contract; contracts are perfected by mere consent and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all consequences which, according to their nature may be in keeping with good faith, usage and law.
4. Fulfill what has been expressly stipulated
5. All consequences w/c may be in keeping with good faith, usage and law
6. Relativity – binding only between the parties, their assigns, heirs; strangers cannot demand enforcement
B. EXCEPTION TO RELATIVITY:
1. Accion Pauliana 2. Accion directa
3. Stipulation pour autrui
C. REQUISITES OF STIPULATION POUR AUTRUI
1. Parties must have clearly and deliberately conferred a favor upon a 3rd person 2. The stipulation in favor of a 3rd person should be a part of, not the whole contract 3. That the favorable stipulation should not be conditioned or compensated by any kind of obligation whatsoever
4. Neither of the contracting parties bears the legal representation or authorization of 3rd party
5. The third person communicates his acceptance before revocation by the original parties
6. Art 1312; Art 1314
In contracts creating real rights, third persons who come into possession of the object of the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land Registration Laws
D. REQUISITES:
1. Existence of a valid contract
2. Knowledge of the contract by a 3rd person 3. Interference by the 3rd person
E. TEST OF BENFICIAL SITUATION
The fairest to determine whether the interest of 3rd person in a contract is a stipulation pour autrui or merely an incidental interest is to rely upon the intention of the parties as disclosed by their contract. Determine whether contracting parties desired to tender him such interest Uy Tam vs. Leonard, [30 Phil 471]
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TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 2. Kinds of Contracts
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2. KINDS OF CONTRACTS
1. As to perfection or formation
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a. Consensual – perfected by agreement of parties
b. Real – perfected by delivery (e.g.
commodatum, pledge, deposit)
c. Formal/solemn – perfected by conformity to essential formalities (donation )
2. As to cause
a. Onerous – with valuable consideration b. Gratuitous – founded on liberality c. Remunerative – prestation is given for
service previously rendered not as obligation
3. As to importance or dependence of one upon another
a. Principal – contract may stand alone b. Accessory – depends on another
contract for its existence; may not exist on its own
c. Preparatory – not an end by itself; a means through which future contracts may be made
4. As to parties obliged
a. Unilateral – only one of the parties has an obligations
b. Bilateral – both parties are required to render reciprocal prestations
5. As to form
a. Common or informal – require no particular form
b. Special or formal – require some particular
Form
6. As to their purpose
a. Transfer of ownership b. Conveyance of use c. Rendition of service 7. As to their subject matter
a. Things b. Services
8. As to the risk involved
a. Commutative – example lease b. Aleatory – example insurance 9. As to name or designation
a. Nominate – those which have their own distinctive individuality and are regulated by special provisions of law b. Innominate – those which lack
individuality and are not regulated by special provisions of law
II. Do ut des – I give that you may give III. Do ut facias – I give that you may do IV. Facio ut des – I do that you may give V. Facio ut facias – I do that you may do
NOTE: According to some authorities, do ut des is no longer an innominate contract. It has already been given a name of its own, i.e. barter or exchange. (Art. 1638)
STAGES IN A CONTRACT:
1. Preparation - negotiation 2. Perfection/birth
3. Consummation – performance FORMAL CONTRACTS
1. Donation
The donation of a movable may be made orally or in writing (Article 748)
An oral donation requires the simultaneous delivery of the thing or of the document representing the right donated. (Article 748)
If the value of the personal property donated exceeds five thousand pesos, the donation and the acceptance shall be made in writing. Otherwise, the donation shall be void. (Article 748)
In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. (Article 749)
The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor. (Article 749)
If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.
(Article 749) 2. Partnership
A partnership may be constituted in any form, except where immovable property or real rights are contributed thereto, in which case a public instrument shall be necessary. (Article 1771)
A contract of partnership is void, whenever immovable property is contributed thereto, if an inventory of said property is not made, signed by the parties, and attached to the public instrument. (Article 1773)
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3.
Antichresis
The amount of the principal and of the interest shall be specified in writing;
otherwise, the contract of antichresis shall be void
4. Agency to Sell Real Property
When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing;
otherwise, the sale shall be void. (Article 1874)
5. Interest
No interest shall be due unless it has been expressly stipulated in writing (Article 1876)
6. Ordinary Diligence
A stipulation between the common carrier and the shipper or owner limiting the liability of the former for the loss, destruction, or deterioration of the goods to a degree less than extraordinary diligence shall be valid, provided it be:
o In writing, signed by the shipper or owner;
o Supported by a valuable consideration other than the service rendered by the common carrier; and
o Reasonable, just and not contrary to public policy. (Article 1744)
7. Chattel Mortgage
By a chattel mortgage, personal property is recorded in the Chattel Mortgage Register as a security for the performance of an obligation. If the movable, instead of being recorded, is delivered to the creditor or a third person, the contract is a pledge and not a chattel mortgage.
8. Sale of Large Cattle
The form of sale of large cattle shall be governed by special laws. (Article 1581)
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TOPICS UNDER THE SYLLABUS A. GENERAL PROVISIONS 3. Formality
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3. FORM OF CONTRACTS
FORM: in some kind of contracts only as contracts are generally consensual; form is a manner in which a contract is executed or
FORM: in some kind of contracts only as contracts are generally consensual; form is a manner in which a contract is executed or