Obligation and Contracts - Title II. - CONTRACTS Chapter 2 ESSENTIAL REQUISITES OF CONTRACTS PDF

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CHAPTER 2: ESSENTIAL REQUISITES OFCONTRACTSArt. There is no contract unless the following requisites concur: Consent of the contracting parties- meeting of the minds of the two parties Object certain which is the subject matter of the contract- must be definite and certain (ex. Land, or house etc) C...

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CHAPTER 2: CONTRACTS

ESSENTIAL

REQUISITES

OF

Art.1318 There is no contract unless the following requisites concur: Consent of the contracting parties- meeting of the minds of the two parties Object certain which is the subject matter of the contract- must be definite and certain (ex. Land, or house etc) Cause of the obligation which is established- compelling reason in the performance of the contract or why a party assumes an obligation Elements of a Contract 1. Essential elements a) Common b) Speciaal i. Real contracts (involves the delivery) ii. Solemn or formal contracts(donation enter vivus) 2. Natural elements 3. Accidental elements

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. Example: for the 1st par. Of the art. A offer to sell car to B for P1 million. B still doesn’t

consent that she will buy the car but A already withdraw his offer. Is A allowed to withdraw his offer? Yes, he can still withdraw his offer because there’s still no perfection of the contract between A and B. Capacitated

Vitation

Qualified acceptance

Counteroffer

Requisites of CONSENT: 1. There must be 2 parties; 2. The parties must be CAPABLE and CAPACITATED; 3. There must be NO VITATION of consent; 4. There must be NO CONFLICT between what was expressly declared and what was really intended; 5. Intent must be declared PROPERLY. Example: for the 2nd sen. Of the article B offer to buy the car of A for P800,000. A counteroffer to B to to sell the car for P1 million. But B decline A’s offer. After one day, A decided to accept the offer of B. Can B NOT buy the car? Is the contract perfected? Yes, it is still possible because there’s now an acceptance of the contract. Art. 1319 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. Example: On December 1, A offer to sell car to B for P1 million

through a letter. On December 5, B received the letter , she accept A’s offer and agree to buy the car. B sent a letter of acceptance to A on December 10. While the mail is still in the course, A died from a heart attack. Is the contract perfected? No, because the death of either of the parties before the acceptance renders the offer and acceptance and effective. Remember that acceptance made by letter or telegram does not bind the offerer except from the time it came to his knowledge. EXAMPLE: On December 1, C offer his house for lease to D. On December 15, D sent a letter of acceptance to C. On the ff. Day C received the letter of acceptance. Last December 15 in the morning, C already sent a letter withdrawing the offer. Was there a contract? No, because prior to the receipt of the letter of acceptance, the offer had already been withdrawn. Note that aceptance is only binding by the time it came to his knowledge. Art 1320 An acceptance may be express or implied.

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

EXAMPLE: C offer to sell his land to D. C can state or decide that the acceptance of the this offer must be made in writing and must be sent on or before Dec 31.

Agent Are extensions of the personality of his principal.

Art 1322 An offer made through an agent is accepted from the time acceptance is communicated to him. EXAMPLE: C offer to sell his car for P1 million to D. E is an authorized person of C and she was the one who introduces the offer of C to D. Once D accepts the offer, D may communicate his acceptance through E even if E is only an agent of C because E was the one who introduce the offer to D. But if C was the one who introduced the offer who is the principal offerer then D’s acceptance must be communicated directly to C.

Option Contract It is when the offerer give option to the offeree a certain period to accept Option money The amount paid before the option contract due.

Art 1323 An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either party before acceptance is conveyed. Art 1324 When the offerer has allowed the offeree a certain period to accept, the offer may be withdrawn at

except when the option is founded upon a consideration, as something paid or promised. any time before acceptance by communicating such withdrawal,

EXAMPLE:

On November 1, C sent a letter offering to sell his house for P1 million to D. In the letter, it stated that C is giving D 10 days to decide or accept the offer. But on December 5, C withdraw his offer. Can C validly do so? Yes, because the offer was withdrawn before D accepted the offer which is within 10 days. Exception is when for example D pays 1,000 as an option money to C then C can no longer withdraw his offer due to an option founded upon a consideration. NOTE: If D already accepted the offer before the C decide to withdraw the offer then C can no longer withdraw it because there was already a meeting of minds between C and D. Art 1325 Unless it appears otherwise, business advertisements of things for sale are not definite offers, but mere invitations to make an offer. EXAMPLE: Definite Offer: FORSALE: 100 Square Meter Lot, with 2-storey house located at 123, ABC St., Malate, Manila for Php 10,000,000.00 cash. Mere invitation to make offer: FOR SALE: 100 Square Meter Lot, at 10 million to 20 million a lot at 123, ABC St., Malate, Manila. 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. In simple words, the bidders are the one who make proposals and the advertiser are only inviting bidders to make proposals. General Rule: Advertisements are merely an invitations 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. Art 1328 Contracts entered into during lucid interval are valid. Contracts agreed to in a state of drunkenness or during a hypnotic spell are voidable. Lucid Dream A brief period during which an insane person regains sanity sufficient to have the legal capacity to contract and act on his or her own behalf. 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.

Art 1330

A contract where consent is given through mistake, violence, intimidation, undue influence, or fraud is voidable. Characteristics of Consent a) Intelligent - must be capable to give consent b) Free - no intimidation or violence c) Spontaneous - no mistake or fraud Voidable contracts are binding and valid until annulled. 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 quality 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 the correction.

When can you say that the error is substantial? If the party still enter into the contract despite that mistake meaning it is not a substantial error because if it is a substantial error then if the party knows the mistake then the party will not enter into the contract.

EXAMPLE: Mistake regarding the Object of the contracts F and Z entered into a contract, the contract stated that F must deliver 32k gold necklace to Z. Upon the delivery, it turn out to be a 16k of gold only. ( So if Z only knew that the gold that will be deliver is only a 16k then Z would probably not entered into the contract. Mistake regarding the Condition of the contracts Y deliver to W a car, thinking that W will pay when she will have money, W agrees in the belief that it is donated to him by Y. Mistake regarding the identity or qualifications of one party of the contracts L donated to X a car, thinking that X is a lawyer, who is really a doctor L donated to X a car, thinking that X was his half-sister. It turned out that X is not related to L.( So the mistake as to the identity of X is material because X’s identity was the principal reason or consideration why L gave his car)

EXAMPLE : A simple mistake of account shall give rise to the correction. P buy 10 pieces of ballpen worth P6.50 each to S. Instead of paying a total of P65, P paid P75 and it was made by mistake. ( the error was merely by miscalculations so it doesn’t need an annulment of contract but only ris to a correction.).

NOTE: If a mistake was so obvious then it will not invalidate consent 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. This General Rule or Presumption is not applicable to the article: One always act with due care and signs with full knowledge of the content of the document EXAMPLE: Q is a blind man who sign a contract with R through a thumb mark believing it is a contract of mortgage, but is really a Deed of Sale. If Q claims fraud or mistake, R has the burden of proving compliance with article 1332. (If R is not able to prove it then the contract of Deed of Sale will be annulled). Art. 1333 There is no mistake if the party alleging it knew the doubt, contingency or risk affecting the object of the contract. EXAMPLE: If someone offers you of buying a land and informed you that there’s still a pending litigation of that land because there are many claimants as to who really the owner of that land. Later on, your seller lost the case as to his/her claim over that land then you cannot claim mistake or you cannot

annulled that contract because of vitiated consent because you knew that the land has still a pending litigation and that you have taken the risk or chances. Art. 1334 Requisites of when will the mutual error may vitiate consent Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent. EXAMPLE: V and Y intended to enter into a Contract of Mortgage, but executed a document for a Contract of Sale believing that both has the same legal effects. Their contract can be subject to annulment because the contract arises from mutual error.

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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 It is an external and physical force or compulsion exerted

upon a person to prevent him from doing something or compelling him to do an act. Requisites for VIOLENCE to vitiate consent: 1. Employment of serious or irresistible force; 2. It must have been the reason why the contract was entered into Intimidation It is an internal moral force operating in the will and inducing the performance of an act. The victim is compelled to consent due to a reasonable and wellgrounded fear of an imminent and grave evil upon his person or those of his spouse, descendants and ascendants. Requisites for INTIMIDATION to vitiate consent: 1. Reasonable or well-grounded fear; 2. Of an imminent and grav evil 3. Upon his person, property or upon the person or property of his spouse, descendants, or ascendants. 4. It must have been the reason why the contract was entered into 5. The threat must be of unjust act, an actionaable wrong. Example: When a A threat his debtor W that she will file a case against W if he he can’t still pay the debt which is due. 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.

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. Art. 1338 There is fraud when, through insidious words or machination 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: 1. In the celebration of the Contract/perfection stage a) Dolo causante/Causal Fraud b) Dolo incidente/Incidental Fraud - the remedy for this is an action for damages only. 2. In the performance of the Contract - the remedy for this is an action for annulment with damages. - Consent is vitiated by serious deception or misrepresentation Requisites for Dolo Causante: 1. The fraud must be material and serious 2. The fraud must be employed by only on eparty 3. Deliberate intent ti ddeceived 4. The other party must have rely on thta untrue statement, and must not be negligent.

EXAMPLE: Concealment of illness for an insurance 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. NOTE: If the failure to disclose facts became fraudulent therefore it will become the basis for the annulment of the contract. EXAMPLE: Y and X are partners engaged in a real estate business. X learned that C is interested in buying the parcel of land owned by the partnership even at a high price. X convinced Y to sell the parcel of land to him, making X the new owner of the land. After that, X sell the land to C with a big profit. X is guilty of fraudulent concealment because X has the duty to disclose the facts to Y that C is interested in buying the property of the partnership for a big profit. Instead X, conceal it in order that he can have the profit only for himself. Art. 1340 The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. The article refers to the usual exaggerations in trade which

are not fraudulent by themselves when the party has the opportunity to investigate and know the true facts. EXAMPLE: When X sell a GlutaWhite to Y and Y did buy it believing that it will really make her skin white. (Dealer’s talks do not give rise to actions for damages because of their insignificance or because it is the credulousness or stupidity of the victim which is real cause of his loss). NOTE: Caveat emptor – the buyer has the duty to check the title of the seller over the property plus other circumstances necessary for his own protection. Otherwise he would be buying the property at his own risk. 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. Art. 1342 Misrepresentation by a third person does not vitiate consent, unless such misrepresentation has created substantial mistake and the same is mutual. REMEDY for this article is only for damages. EXAMPLE: X buy a land for 1,000 per square meter from Y. C make Y believe that the market price of the land is only good for 1,000 per sqm. But the real reasonable price of the land in same vicinity is 2,000 per sqm. (the contract cannot be annulled because the fraud was committed by a third party then the example does not suit the exception of the article

that it has no mutual substantial mistake. Unless Y can prove connivance between X and C to defraud him. That’s the time that the contract can be annulled). EXAMPLE: Y is an owner of a parcel of land in his province. X a foreign businessman is looking for a land to buy to build his factory. V who is a Congressman of the province told Y and X that the land of Y is a residential zone. ( The contract can be annulled because there was a mutual substantial mistake- Y and X were mislead by V) Art. 1343 Misrepresentation made in good faith is not fraudulent but may constitute error. EXAMPLE: Y an owner of a jewelry shop sell rings with diamonds not really knowing that it has no diamonds in it at all . B a customer ordered a ring with diamonds. On the day of the delivery B received a ring with no diamonds. ( In good faith because Y also doesn’t know that there’s no diamond in the ring then the contract is voidable but not on the ground of fraudulent only by a mistake).

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: 1. The fraud must be serious; 2. The parties must not be in pari delicto (mutual guilt), otherwise, neither party may ask for annulment. The contract would, therefore, be considered valid. 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. EXAMPLE: 1. A and B enter into a contract of marriage for just a joke 2. A and B executed a contract of sale for purposes of deceiving other people without any intention to be bound by the contract. 3. A donated his house and lot of B. They executed Deed of Sale instead of Deed of Donation to avoid paying donors tax 4. A mortgage his land to B. They executed Deed of Sale instead of Deed of Mortgage in favor of B. But B sell

the land to C even if the land was only for mortgage. Art. 1347 All the 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, morsls, good customs, public order or public policy may likewise be the object of a contract. Object of Contracts Requisites: 1. Things or service must be within the commerce of men (not to sidewalks, votesbuying and others); 2. It must be transmissible; 3. It must not contrary to law, morsls, good customs, public order or public policy. Future inheritance General Rule: It cannot be an object of contract Exception: when expressly allowed by law NOTE: Inheritance ceases to be future upon the death of the decedent. Art. 1348 Requisites of the Contracts: Object Impossible things or services cannot be the object of contracts. Objects of contracts cannot be impossible. It can be either: 1. Physical Impossible - you’re aware that it can’t happen a) Absolute - when no one can’t do it

b) Relative - available for one circumstance but not for others 2. Legal Impossible - when the law stated it to...