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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 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.
Meaning of Consent:
It is the meeting of minds or mutual assent between the parties on the
subject matter and the cause which are to constitute the contract even if
neither has been delivered. Mutual assent or agreement takes place
when there is an offer and acceptance of the offer.
Requisites of Consent:
> There must be 2 or more parties.
> The parties must be capable or capacitated.
> The must be no vitiation of consent.
>There must be no conflict between what was expressly declared and
what was really intended.
> The intent must be declared properly.
Meaning of Offer:
It is a proposal made by one party (offerer) to another (offeree),
indicating a willingness to enter into a contract.
> offer must be certain or definite so that the liability of the parties may
be exactly fixed because it is necessary that the acceptance be identical
with the offer to create a contract.
> an offer made in jest or in anger, or while emotionally upset or in other
ways indicating that the same was not seriously intended is not a valid
offer.
Meaning of Acceptance:
It is the manifestation by the offeree of his assent to all the terms of the
offer. Without acceptance, there can be no meeting of the minds between
the parties.
Art. 1320. An acceptance may be express or implied.
Forms of Acceptance:
(a) Express oral or written.
(b) Implied inferred from act or conduct.
(c) Presumed (by law)
Art. 1321. The person making the offer may fix the time, place,
and manner of acceptance, all of which must be complied with.

Things that may be fixed by the offerer:


> The person making the offer has the right to prescribe the time, the
place, and the manner of acceptance, all of which must be complied with.
> The offer must be communicated and received by the offeree. It may
be by letter, telephone, e-mail, or the like.
Art. 1322. An offer made through an agent is accepted from the
time acceptance is communicated to him.
Communication of acceptance:
(1) To offerer the acceptance of the offer must be absolute.
(2) To agent By legal fiction, an agent is considered an extension of
the personality of his principal.
Art. 1323. An offer becomes ineffective upon the death, civil
interdiction, insanity, or insolvency of either party before
acceptance is conveyed.
When offer becomes ineffective:
an offer may be revoked or withdrawn at any time before it is accepted
merely by communicating such intentions to the party. After acceptance,
the contract is already perfected. Even if the offer is not withdrawn, its
acceptance will not produce a meeting of the minds in case the offer has
already become ineffective because of the death, civil interdiction,
insanity, or insolvency of either party before conveyance of the
acceptance of the offer.
> When the offeree expressly or impliedly rejects the offer.
> When the offer is accepted with a qualification or condition. (counteroffer)
> When before acceptance is communicated, the subject matter has
become illegal or impossible.
> When the period of time given to the offeree within which he must
signify his acceptance has already lapsed.
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.
Meaning of Option:
It is a contract granting a person the privilege to buy or not to buy
certain objects at any time within the agreed period at a fixed price.
General rule on Options:
If 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.
> Option contract is one giving a person for a consideration a certain
period within which to accept the offer of the offerer.

> Option period is the period given within which the offerree must
accept the offer.
> Option money is the money paid or promised to be paid in
consideration for the option.
Exception:
The exception is when the option is founded upon a consideration, as
something paid or promised.

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 generally not definite offer
> Business advertisements of things for sale are not definite offers
acceptance of which will perfect a contract but are merely invitations to
the reader to make an offer.
> If the advertisement is complete in all the particulars necessary in a
contract, it may amount to a definite offer which, if accepted, will
produce a perfected contract.
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 generally not definite offer
> In an advertisement for bidders, the advertiser is not the one making
the offer. In reality, the bidder is the one making the offer which the
advertiser is free to accept or reject.
> As a general rule, the advertiser is not bound to accept the highest
bidder or the lowest bidder unless the contrary appears.
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.
2 classes of voidable contracts:
> those where one party is incapacitated to give consent.
> those where the consent of one party has been vitiated.
Persons incapacitated to consent:
> Unemancipated minors refer to those persons who have not yet
reached the age of majority and still subject to parental authority.
> Insane or demented persons (unless they acted during a lucid
interval), drunks and those hypnotized
> Deaf-mutes who do not know how to write (and read) persons
who are deaf and dumb. However, if the deaf-mute knows how to write,
the contract is valid for then he is capable of giving intelligent consent.

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.
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.
Lucid Interval is a temporary period of sanity. A contract-entered into
by an insane or demented person during a lucid interval is valid.
Effect of drunkenness and hypnotic spell
Drunkenness and hypnotic spell impair the capacity of a person to give
intelligent consent. These conditions are equivalent to temporary
insanity. Hence, the law considers a contract entered into in a state of
drunkenness, or during a hypnotic spell voidable.
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.
In addition to the incapacity declared in Article 1327, other special
disqualifications may be provided by law.
Under the rules of court, the following are considered
incompetents and may be placed under guardianship.
> persons suffering the accessory penalty civil interdiction
> Hospitalized lepers
>Prodigals (spendthrifts)
> Deaf and dumb who are unable to read and write
>Those who are of unsound mind even though they have lucid intervals
> 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 thereby an easy prey for deceit and
exploitation.
Art. 1330. A contract where consent is given through mistake,
violence, intimidation, undue influence, or fraud is voidable.
There is no valid consent unless:
> It is intelligent there is capacity to act.
> It is free and voluntary there is no vitiation of consent by reason of
violence or intimidation.
> It is conscious or spontaneous there is no vitiation of consent by
reason of mistake, undue influence, or fraud.
Causes of vitiated consent (vices of consent:

>
>
>
>
>

Error or mistake
Violence of force
Intimidation or threat
Undue influence
Fraud or deceit

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.
Meaning of Mistake or error:
It is the false notion of a thing or a fact material to the contract.
Nature of mistake:
> Mistake may be of fact or of law. It may arise from ignorance or lack of
knowledge.
> The mistake contemplated by law is substantial mistake of fact, that is,
the party would not have given his consent had he known of the mistake.
Hence, not every mistake will vitiate consent and make a contract
voidable.
> The mistake may be unilateral when only one party is mistaken about
a material fact, or bilateral when both parties are in error. Generally, a
person who makes mistake cannot avoid liability to the innocent party
unless he shows that he was free of fault or negligence.
Mistake of fact to which law refers: (which may vitiate consent)
> The substance of the thing which is the object of the contract
> Those conditions which have principally moved one or both parties to
enter into the contract
> The identity or qualifications of one of the parties provided the same
was the principal cause of the contract
Mistake of fact which does not vitiate consent:
> Error as regards the incidents of a thing or accidental qualities thereof
not taken as the principal consideration of the contract, does not vitiate
consent unless the error is caused by fraud of the other party.
> Mistake as to quantity or amount does not also vitiate consent but only
gives rise to its correction unless it goes to the essence of the contract.
> Error as regards to the motives of the contract does not also vitiate
consent unless the motives constitute a condition or cause of the
contract.
> Mistake as regards the identity or qualifications of a party does not
vitiate consent for the reason that contracts are entered into more in
consideration of the things or services which form their subject matter
rather than of persons.

> Error which could have been avoided b the party alleging it, or which
refers to a fact known to him, or which he should have known by the
exercise of ordinary diligence, or which is so patent and obvious that
nobody could have made it, will not invalidate consent.
Effect of mistake of account:
> Where mistake simple - a simple mistake of account or calculation
does not avoid a contract because it does not affect its essential
requisites. The defect is merely in the computation of the account or
amount which can be corrected.
> Where mistake gross where the mistake was so gross that it was
clearly apparent to one party and, therefore, would be impossible to
escape his notice, said party cannot avoid liability on the ground of
mistake in computation.
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.

When a person signs a document, the presumption is that he does so


with full knowledge and understanding of the contents of the same. He is,
therefore bound by all its terms.
A presumption is a fact accepted as true until proved otherwise.
Exception to the rule above:
When one of the parties is unable to read or if the contract is in a
language not understood by him, it is the party enforcing the contract
who is duty-bound to show that there has been no fraud or mistake and
that the terms of the contract have been fully explained to the former.
When Presumption does not apply:
> When one of the parties is unable to read (including a blind person)
> If the contract is in a 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.
If a party knew beforehand the doubt, contingency, or risk affecting the
object of the contract, it is to be assumed that he is willing to take
chances and cannot, therefore, claim mistake.
Art. 1334. Mutual error as to the legal effect of an agreement
when the real purpose of the parties is frustrated, may vitiate

consent.
Meaning of mistake of law:
Mistake of law is that which arises from an ignorance of some provision of
law, or from an erroneous interpretation of its meaning, or from an
erroneous conclusion as to the legal effect of an agreement, on the part
of one of the parties.
As a rule, mistake of law does not invalidate consent because ignorance
of the law excuses no one from compliance therewith.
Requisites for mutual error to vitiate consent:
> The error must be mutual.
> It must refer to the legal effect of the agreement.
> It must frustrate the real purpose of the parties.
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 coercion/force; Intimidation refers to moral
coercion/force.
Requisites for Intimidation to vitiate consent:
> reasonable and well-grounded fear
> of an imminent and grave evil
> upon his person, property, or upon the person or property of his
spouse, descendants, or ascendants.
> it must have been the reason why the contract was entered into
* The fear is reasonable and well-grounded when those who threaten
have power, and when maltreatment has accompanied the threat.
* 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 threat of a court action as a means to enforce a just or legal claim
is justified and does not vitiate consent.
Art. 1336. Violence or intimidation shall annul the obligation,
although it may have been employed by a third person who did

not take part in the contract.


Violence and intimidation may be employed by a third person who did
not take part in the contract. However, to make the contract voidable or
annullable, it is necessary that the violence or intimidation must be of the
character required in Art 1335.
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 weakness, or was ignorant or in financial
distress.
Meaning of Undue Influence:
Undue influence is influence of a kind that so overpowers the mind of a
party as to prevent him from acting understandingly and voluntarily to do
what he would have done if he had been left to exercise freely his own
judgement and discretion.
Requisites for undue influence to vitiate consent:
> improper advantage
> power over the will of another
>deprivation of the latters will of a reasonable freedom of choice
Circumstances to be considered:
> confidential, family, spiritual and other relations between the parties
> mental weakness
> ignorance
> financial distress of the person alleged to have been unduly influenced.
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.
Kinds of Fraud:
> Dolo causante (casual fraud) Here, were it not for the fraud, the
other party would not have consented.
> Dolo incidente (incidental fraud) Here, even without the fraud the
parties would have agreed just the same, hence the fraud was only
incidental in causing consent.
Meaning of Casual fraud:
Casual fraud is the fraud committed by one (1) party before or at the
time of the celebration of the contract to secure the consent of the other.
It is the fraud used by a party to induce the other to enter into a contract
without which the latter would not have agreed to.

How casual fraud committed:


Casual fraud may be committed through insidious words or machinations
or by concealment. Insidious words or machinations include any
misrepresentation in words or actions done with a fraudulent purpose.
Requisites of casual fraud:
>There must be misrepresentation or concealment of a material fact with
knowledge of its falsity.
> It must be serious
> It must have been employed by only one of the contracting parties.
> It must be made in bad faith or with intent to deceive the other
contracting party who had no knowledge of the fraud.
> It must have induced the consent of the other contracting party.
> It must be alleged and proved by clear and convincing evidence.
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.
Fraud by concealment:
A neglect or failure to communicate or disclose that which a party to a
contract knows and ought to communicate constitutes concealment. In
this case, concealment is equivalent to misrepresentation or false
representation.
The injured party is entitled to rescind or annul the contract whether the
failure to disclose the material facts is intentional or unintentional as long
as there is a duty to reveal them and the party is misled or deceived in
entering into the contract.
If the failure is unintentional, the basis of the action for annulment is not
fraud but mistake or error.

Art. 1340. The usual exaggerations in trade, when the other


party had an opportunity to know the facts, are not in
themselves fraudulent.
Usual exaggerations in trade
It is the natural tendency for merchants and traders to resort to
exaggerations in their attempt to make a sale at the highest price
possible. When the person dealing with them had an opportunity to know
the facts, the usual exaggerations in trade are not in themselves
fraudulent.
Customers are expected to know how to take care of their concerns and
to rely on their own independent judgement. Any person who relies on
said exaggerations does so at his own peril.

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.
Expression of opinion.
To constitute fraud, the misrepresentation must refer to facts, not
opinions. Ordinarily, a mere expression of an opinion does not signify
fraud. In order that it may amount to fraud, the flg requisites must be
present:
> It must be made by an expert
> The other contracting party has relied on the experts opinion
> The opinion turned out to be false or erroneous

Art. 1342. Misrepresentation by a third person does not vitiate


consent, unless such misrepresentation has created substantial
mistake and the same is mutual.
Fraud by a third person:
A third person has no connection with a contract. Consequently, a
misrepresentation by him does not vitiate consent. A party should not be
made to suffer for the imprudence of another in believing the fraud of a
third person. The presumption is that both contracting parties are acting
in good faith.
However, if the misrepresentation has created substantial mistake and
the same is mutual, that is, it affects both parties, the contract may be

annulled but principally on the ground of mistake.


The force or intimidation employed by a third person on one of the
parties makes a contract voidable.
Art. 1343. Misrepresentation made in good faith is not fraudulent
but may constitute error.
Effect of misrepresentation made in good faith:
If the misrepresentation is not intentional but made in good faith (the
person making the false statement believed it to be true), it is considered
a mere mistake or error. Fraud is definitely more serious than mistake;
hence, the party guilty of fraud is subject to greater liability.
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
two requisites for fraud as a ground for annulment are given in this
Article:
> the fraud must be serious
> It should not have been employed by both contracting parties. They
should not be in pari delicto.
> It should not have been known by the other contracting party.
Incidental fraud does not vitiate consent
Incidental 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.
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.
Simulation of a contract meaning:
It is the process of intentionally deceiving others by producing the
appearance of a contract that really does not exist (absolute simulation)
or which is different from the true agreement (relative simulation).
Requisites for Simulation:
> An outward declaration of will different from the will of the parties

> The false appearance must have been intended by mutual agreement
> The purpose is to deceive third persons
Kinds of Simulated contracts:
(a) Absolutely simulated (simulados) fictitious contracts:
1.) Here, the parties do not intend to be bound.
2.) Effect: the contract is void.
(b) Relatively simulated (disimulados) disguised contracts:
1.) Here, the parties conceal their true agreement.
2.) Effect: The parties are bound to the real or true agreement except
> if the contract should prejudice a third person
> or if the purpose is contrary to law, morals, good customs,
public order, public policy.
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.
Art. 1348. Impossible things or services cannot be the object of
contracts.
Concept of object of a contract
The object of a contract is its subject matter.
In reality, the object of every contract is the obligation created. But since
a contract cannot exist without an obligation, it may be said that the
thing, service, or right which is the object of the obligation is also the
object of the contract.
Kinds of object of contract
Object certain is the second essential element of a valid contract. The
object may be things (as in sale), rights (as in assignment of credit), or
services (as in agency).
Requisites of things as object of contract
> The thing must be within the commerce of men, that is, it can legally
be the subject of commercial transaction.
> It must not be impossible, legally or physically.
> It must be in existence or capable of coming into existence.
> It must be determinate or determinable without the need of a new
contract between the parties.

Requisites of services as object of contract:


> The service must be within the commerce of men.
> It must not be impossible, physically or legally.
> It must be determinate or capable of being made determinate.
Rights as object of contract
As a general rule, all rights may be the object of a contract. The
exceptions are when they are transmissible by their nature, or by
stipulation, or by provision of law.
Definition of future inheritance
Future inheritance is any property or right, not in existence or capable of
determination at the time of the contract, that a person may inherit in
the future, such person having only an expectancy of a purely hereditary
right.
Inheritance ceases to be future upon the death of the decedent or
deceased.
Validity of contracts upon future inheritance
The law permits contracts on future inheritance (1) in the case of donations by reason of marriage between future
spouses with respect to their future property to take effect, only in the
event of death, to the extent laid down by law in testamentary
succession
(2) in the case of partition of property by act inter vivos by a person to
take effect upon his death.
Kinds of impossibility
(1) Physical when the thing or service in the very nature of things
cannot exist or be performed. With particular reference to services, the
impossibility may be:
(a) Absolute when the act cannot be done in any case so that nobody
can perform it.
(b) Relative when it arises from the special circumstances of the case
or the special conditions or qualifications of the obligor
(2) Legal when the thing or sevice is contrary to law, morals, good
customs, public order, public policy. An act is contrary to law, either
because it is forbidden by penal law or a rule of law makes it impossible
to be done, to make a valid will, where the testator is under 18 years of
age.
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.
Quality of object of contract need not be determinate

The object of a contract must be determinate as to its kind or at least


determinable without the necessity of a new of further agreement
between the parties. The same is true of the quantity of the object of the
contract. It is sufficient that it is possible to determine the same without
the need of a new contract between the parties.