Oblicon 05 - Notes PDF

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Article 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable.By: Johannes AquinoCharacteristics of consent.In order that consent may be sufficient for purposes of contract, it is required, not only that it exists. Aside from the requi...

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Article 1330. A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. By: Johannes Aquino Characteristics of consent. In order that consent may be sufficient for purposes of contract, it is required, not only that it exists. Aside from the requirement that consent must be manifested by the meeting of the offer and the acceptance (Art. 1319.), there is no valid consent unless: (1) It is intelligent. — There is legal capacity to act. (see Arts. 13271329.) The consent must be given with an exact notion over the thing consented to or the matter to which it refers. In the case of a juridical persons such as a corporation, consent may only be given through officers duly authorized by its board of directors; (2) It is free and voluntary . — There is no vitiation of consent by reason of violence or intimidation (see Art. 1330.); and (3) It is conscious or spontaneous. — There is no vitiation of consent by reason of mistake, undue influence, or fraud. Thus, Article 1330 enumerates in a negative manner the different requisites of consent. In addition, under Articles 1327, 1328, and 1329, the contracting parties must possess the necessary legal capacity. (Arts. 1327-1329.) Simulation of contract renders the apparent contract void. (see Arts. 1345-1346.) Vices of consent. Aside from incapacity and simulation of contract, the following are the causes that vitiate consent or render it defective so as to make the contract voidable: (1) error or mistake; (2) violence or force (Art. 1335.); (3) intimidation or threat or duress (Ibid.); (4) undue influence (Art. 1337.); and (5) fraud or deceit. (Art. 1338.)

These vices are defects of the will, the existence of which impairs the intelligence (1), freedom (2, 3, 4) and spontaneity (5) of the party in giving consent to the contract. Causes vitiating consent and causes of incapacity distinguished. (1) The former are temporary, while the latter are more or less permanent; and (2) The first refer to the contract itself, while the second, to the person entering into the contract. Both make a contract voidable or annullable only Illustration: After threats from armed men, Jejomar Monay was forced to sell his farmland to real estate developer Mekeni Villar. Since the deed of sale was signed under violence and intimidation, the acceptance of the contract is not voluntary and is therefore voidable. Voidable Contract- binding & valid, unless annulled by a proper action in court – however, it is susceptible to ratification before annulment. There must be clear and convincing evidence on the Vice of Consent.

Article 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. By: Kristia Capio Mistake or error is the false notion of a thing or a fact material to the contract. NATURE OF MISTAKE (1) Mistake may be of fact or of law. In general, the mistake to which Article 1331 refers is mistake of fact. It may arise from ignorance or lack of knowledge. (2) 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. MISTAKE OF FACT TO WHICH LAW REFERS In order that mistake may vitiate consent, it must refer to: (1) the substance of the thing which is the object of the contract; or (2) those conditions which have principally moved one or both parties to enter into the contract; or (3) the identity or qualifications of one of the parties, provided, the same was the principal cause of the contract. No. 1 above includes mistake regarding the nature of the contract, as when the contracting parties believe that the other is selling, when in truth and in fact, both are buying. MISTAKE OF FACT WHICH DOES NOT VITIATE CONSENT (1) Error as regards the incidents of a thing or accidental qualities thereof (e.g., accessibility of a residential house to means of transportation; maximum speed of a car), not taken as the principal consideration of the contract, does not vitiate consent (Art. 1331, par. 1.), unless the error is caused by fraud of the other party. (2) 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. (3) Error as regards the motives of the contract does not also vitiate consent unless the motives constitute a condition or cause of the contract. (4) 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. The exception is when such identity or qualifications have been the principal cause of the contract (Art. 1331, par. 2.), as in contracts, which have for their object obligations to do, requiring personal qualifications of the debtor, or involving trust and confidence, such as contracts of partnership, agency, commodatum, guaranty deposit, etc. (5) Error which could have been avoided by 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. EXAMPLES (1) Mistake regarding object. —

Ex a. Ben is buying from Sarah a breeding cow but Sarah is selling a barren cow. Ex b. A person signed a contract of sale thinking it was only a contract of loan. (2) Mistake regarding condition of the contract. — Sarah is selling his parcel of land for P100,000.00 cash but Ben is buying the land thinking that the price is payable in installments. A contracted for delivery of 32k of gold necklace to B, upon delivery it turned out to be 16k of gold only. (3) Mistake regarding identity or qualifications. — (a) Sarah sold his car to Ben. Sarah thought that Ben, who is a lawyer, was a doctor. The mistake here is not material as to avoid the contract. (b) Ryan donated his car to Ena. Ryan thought that Ena was his half-sister. It turned out that Ena is not related to Ryan. The mistake as to the identity of Ena in this case is material because his identity was the principal reason or consideration for the donation. (4) Error in Quality Ex. A person bought a fountain pen thinking it is made of solid gold when in fact, it was merely gold plated. (5) Error In Quantity Ex. A desired to buy a land consisting of 100 hectares but discovered that the land has only 60 hectares. Ex. Karl sells a 70 hectares of land to B, when in reality it is only 68 Hectares. As to basis of contracts- here circumstances or the occurrence of some events , affects the creation contract, like, the contract would not be entered without it. > Error in Computation/ Error in Account would ordinarily give rise merely to correction. > 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. > However, there is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract.

>Error of Fact, Not of Law because ignorance of the law does not excuse anyone from compliance therewith.

Article 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. by: Bryan Glenn Fabiaña Comment: This article was incorporated because of a belief that there is still a fairly large number of illiterates in the country and documents are ordinarily drawn up in English. As a consequence, the stronger party exploits the weaker party in a contract. Article 1332 therefor protects the weak and disadvantage. Under this article the burden of proof (onus probandi) is shifted to the stronger party to prove that the terms of the contract were fully explained to the weaker party. The burden of proof is shifted now to the party who is enforcing the agreement. He must prove that the document was fully explained to the party alleging fraud or mistake. Failure to rebut the presumption will sustain the charge of fraud or mistake. Illustration: John and Marsha were both blind. They affixed their thumb marks to a deed which they thought was merely a deed of mortgage. It turned out to be a deed of sale of their two (2) hectare land in favor of their son-in-law. The son-in-law must prove that he did not take advantage of his situation as a son-in-law to enrich himself at the expense of unfortunate relatives.

Article 1333. There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. By: Janine Gumangol COMMENT: Knowledge of Doubt or Risk Does Not Vitiate Consent It is to be assumed here that the party was willing to take the risk. This is particularly true in contracts which re evidently aleatory in nature. Example: Arlene bought a magic pen which was represented as it can be used to write even underwater. Arlene also knew that the pen’s ability was questionable, and yet Arlene bought said pen. Here, Arlene cannot allege mistake since she knew beforehand of the doubt, risk, or contingency affecting the object of the contract. Example: Gina acquired a house and lot from Gino Property Holding, historically it is known to the public that Gino area is prone to flood during rainy days. When Jose transferred to their newly purchased house the same house submerged in the flood, thereafter, Gina demanded to cancel his purchase agreement with Gino Property Holding on the ground that his house was flooded. Article 1334. Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent. By: Algy Riguer

Requisites for the application of Article 1334. For the article to apply, the following requisites must be present: 1. The error must be mutual; 2. It must be as to the legal effect of an agreement; and 3. It must frustrate the real purpose of the parties. Example:

Fermin and Nicolas entered into a written contract affecting the land belonging to Fermin, for and consideration of Php 500,000.00. At the time the contract was entered into, Fermin thought that he was given Php 500,000.00 by Nicolas for the mortgage of his (Fermin’s) land. Nicolas, on the other hand, thought that by giving Fermin Php 500,000 he had purchased the land. The contract is voidable and may annul in court. However, if there has been a meeting of minds as the object of the contract, the proper remedy is reformation of the instrument. Ex. 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 mortgaged, as a result of their mutual error as to the legal effect of the agreement. Contract is voidable. Article 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. By: Rose Ann Villanueva Violence is external and requires the employment of physical force which must be serious and irresistible. Requisites for Violence to Vitiate Consent (a) Employment of serious or irresistible fear (b) It must have been the reason why the contract was entered into. Example: If Matata Kutin signs a document because every time he refuses, he is hit by the butt of the gun which causes blood to flow from his head then the contract is voidable. Requisites for intimidation or threat:

1. Reasonable and well-grounded fear 2. Evil must be imminent and grave 3. Evil must be upon his person or property, or that of his spouse, descendants or ascendants. 4. It is the reason why he enters the contract. (If the person concerned would have entered into the contract even w/o the presence of intimidation, it is clear that the contract should be considered valid, for the consent certainly cannot be considered vitiated. 5. The threat must be of an unjust act, an actionable wrong. Fear of displeasing a person to whom obedience or respect is due does not annul a contract. Example: Boy Takas committed a violation of law. Boy Sumbong threatens to report Boy Takas to the police unless the latter gives him P5,000.00 Article 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. By: Jayson Calventas Article 1336 NCC | speaks of… Violence or intimidation by a third person 

Violence or 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 Article 1335.  It is necessary that that the party employing violence must use serious and irresistible force.  Intimidation must draw from the person thus intimidated a reasonable or well-grounded fear of suffering an imminent and serious evil on his person or on his property and also on those of his descendants or ascendants.

 Article 1336 NCC | example:

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While attempting to convince Ben to sign the Deed of Sale of his property, Arturo called on Charlie who then intimidated Ben, saying “Sign this or I will beat you up!” However, Ben is a bodybuilder while Charlie is a 90 lb man. From the circumstances given, the intimidation given by Charlie does NOT reasonably draw from Ben a well-grounded fear of suffering an imminent and serious evil on his person. Deed of Sale is NOT voidable.

Ex. If the 3rd party was called upon, and the stranger points a gun at the party (intimidation) but if the stranger is direct inflicting pain to the party (this is violence) Article 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. Undue influence  

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The influence must be of a kind that so overpowers and subjugates the mind of a party as to destroy his free agency and make him express the will of another, rather than his own. The circumstances to be taken into consideration mostly deal with the relationship of the parties involving trust and confidence.  In some instances, the guilty party has somehow moral ascendancy over the aggrieved party. One improperly takes advantage of his relation to another when he uses this relation to secure the assent of the other party. 3 elements of undue influence  person who can be influenced  the improper influence was exerted  submission to the overwhelming effect of such unlawful conduct

Requisites for Undue Influence to Vitiate Consent > Improper advantage > Power over the will of another > Deprivation of the latter’s will of a reasonable freedom of choice Article 1337 NCC | example:

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While Leon is seeking to eject Terry for failure to pay her rent. Terry is in need of ₱ 5,000 to pay his landlord, Leon. Terry tries to borrow from Charlie. Charlie instead tells him to sell her piano for ₱5,000. Terry has no one to turn to for assistance. If Terry does NOT want to sell the piano BUT she is compelled to sell it BECAUSE of her financial condition, the sale may be voided on the ground of undue influence.

A is in jail, he calls B to bail him out. B set a condition to help A, the condition consists that A sign a contract to buy 30% of her ice cream parlor business for 30,000. A signed the contact without reasonable care because he is being pressured by the other party, which happens to have the upper hand over A. While in INTIMIDATION there must be an unlawful or unjust act which is threatened and which is consent to be given. Illustration: If you will not sell your share of stocks to me I will do harm to your family and to everyone who is close to you. Here the safety of his family is put at risk if he won’t sell his shares, leaving him no choice but to give in to what the other party wants. There is a moral coercion. Contract of Adhesion – A contract of adhesion, wherein one party imposes a ready-made form of contract on the other, is not strictly against the law. A contract of adhesion is as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely. Illustration: You need to borrow money from a bank. After you fill out many different forms and paperwork, the bank is ready to give you a loan. You receive a loan document which includes your responsibilities and the bank’s responsibilities with respect to borrowing the money. This document is a standard form and you simply review the material and sign where necessary. This type of contract is called an adhesion contract. Article 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. By: Johannes Aquino

Kinds of Fraud Fraud in the Celebration of the Contract (1) Dolo Causante (2) Dolo Incidente Meaning of causal fraud. Causal fraud or dolo causante is the fraud employed by one party prior to or simultaneous with the creation 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, taking into account the circumstances of the case. The fraud must be that which determines or is the essential cause of the contract. The fraud contemplated in this article and mentioned in Article 1330 is causal fraud involving the use of deceit or deception. It must be distinguished from the fraud dealt with in Article 1170. > Use of insidious words and machinations by one of the contracting parties to induce the other party to enter into a contract, which, w/o them, he would not have agreed to. How causal fraud committed. Causal fraud may be committed through insidious words or machinations (Art. 1338.) or by concealment. (Art. 1339.) Insidious words or machinations “include false promises, exaggerated expectations or benefits, abuse of confidence, fictitious names, qualities, or power; in fine, the thousand forms of fraud, which can deceive a contracting party, producing a vitiated consent” (8 Manresa 677.), and it is not necessary that they constitute estafa or partake of any other criminal act subject to the penal law. In order that fraud may vitiate consent and be a cause for the annulment of a contract, the following requisites must be present: (1) There must be misrepresentation or concealment (Arts. 1338, 1339.) by a party prior to or simultaneous to the consent or creation of the contract (Caram, Jr. vs. Laureta, supra.); (2) It must be serious (Art. 1344.); (3) It must have been employed by only one of the contracting parties. (Ibid.) Fraud committed by a third person does not vitiate consent unless it was practiced in connivance with or at least with the knowledge of the favored contracting party (see Art. 1342.);