LESSON 1.
GENERAL PROVISION → I give that you may do → I do that you may give
Article 1305. A contract is a meeting of minds between two persons → I do that you may do → I give that you may give (Barter)
whereby one binds himself, with respect to the other, to give According to time of performance
something or to render some service. a. Executed - prestations are already fulfilled at the time contract
Limitations upon the right to contract (must not be contrary to): is entered into (sale of property already been delivered and paid for)
b. Executory - prestations are yet to be fulfilled (a perfected sale where
law to kill a person neither the thing nor the price has been delivered and paid)
morals to live as common law wife without marriage c. Partially executed - only one has performed his obligations,
to renounce one's right as spouse, authorizing the completely/ partially, or where there is only partial performance
good customs
other to live separately and remarry
Different Stages of a Contract
a stipulation that a landlord can use force to eject
public order 1. Preparation or conception: includes all the negotiations or
the tenant in case of failure to pay rent
steps taken by parties leading to the perfection of contract
public policy not testify against one accused of crime for P1000 2. Perfection or birth: the parties have come to a definite
agreement regarding the contract’s subject matter and cause
May the validity or compliance of a contract be left to the will of
3. Consummation or termination: parties have performed their
one of the parties?
obligation, the contract may be said to have been fully executed
● No. A contract has the force of law between the parties and binds
them; otherwise, it cannot be enforced against either. So, a party Who are affected by a contract?
cannot revoke or renounce a contract without the other’s consent. a. contracts are effective only between the parties when it is not
May the determination of the performance of a contract be left to transmissible by their nature, stipulation, or provision of law
a third person? b. third persons or strangers may be affected by contract if:
● Yes, but the decision shall not be binding until it has been made ➢ the stipulation favors third person (stipulation pour autrui)
known to both contracting parties. ➢ it creates real rights
➢ it is entered into to defraud creditors
Characteristics of contract ➢ it have been violated at the inducement of the third person
1. Autonomy or liberty of contracts ➢ it creates "status" (marriage, adoption)
The contracting parties may establish such stipulations, clauses, terms ➢ in negotiorum gestio, the owner is bound in a proper case,
and conditions as they may deem convenient (not contrary to…) by contracts entered into by the "gestor"
2. Obligatory force of contracts ➢ in "collective contracts" where majority rules over minority
Obligations arising from contracts have the force of law between the ➢ where the situation contemplated in Article 1729
contracting parties and should be complied with in good faith.
A third person is one who has not taken part in a contract and is,
3. Mutuality of contracts therefore, a stranger to the contract.
The contract must bind both contracting parties; its validity or As a general rule, a third person has no rights and obligations
compliance cannot be left to the will of one of them. under a contract to which he is a stranger. He has no legal standing or
4. Consensuality of contracts capacity to demand the enforcement of a contract or assail its validity
Contracts are perfected by mere consent; the parties are bound by the even if it is admitted that it is defective.
fulfillment stipulated, and also to all its consequences, which according Article 1311. Stipulation Pour Autrui → a stipulation that clearly and
to their nature, may be in keeping with good faith, usage, and law. deliberately confers a favor upon a third person who has a right to
5. Relativity of contracts demand fulfillment, provided, he communicates his acceptance to the
Contracts take effect only between the parties, their assigns and heirs. obligor before its revocation by the obligee or original parties.
CLASSIFICATIONS Classes of stipulations pour autrui
According to perfection / formation Donee-Beneficiary: Creditor-Beneficiary: an obligation owed by a
a. Consensual: by mere consent (sales, lease, partnership) the stipulation is promisor to third person which the former seeks
b. Real: by delivery of subject matter (deposit, loan, pledge) intended for the sole to discharge through a stipulation, (property
c. Formal/solemn: by execution of the required form (donation of real benefit of such a transfer coupled with purchaser's promise to
property in a public document) person (gratuitous) pay a debt owed by seller to a third person)
According to degree of dependence
a. Preparatory - contract is not an end itself but a means through A person is bound by contract made in their name by another when:
which future transactions may be made (agency, partnership) 1. he is duly authorized, expressly or impliedly, by the person in
b. Principal - the contract may exist by itself (sale, lease) whose name be contractor he must have, by law, a right to
c. Accessory - depends upon other contract (mortgage guaranty) represent him (like a guardian or administrator)
2. he must act within his authority
According to the parties obligated
a. Unilateral - only one party has an obligation (loan) Note: Both requisites must be present; otherwise, the contract is
b. Bilateral - both parties have obligations (sale, lease) unenforceable unless there is ratification by the person in whose name
According to cause or equivalence of the prestation the contract was entered into before it is revoked by the
a. Onerous - there is exchange of valuable consideration (sale)
b. Gratuitous - receives no equivalent prestation (donation)
LESSON 2. REQUISITES
c. Remuneratory - the prestation is in exchange for service or
benefit previously rendered by the party remunerated (A paid Elements (Requisites of a Contract)
P100,000 to B for service rendered of defense in a case) a.common or those present in all contracts
According to risk involved 1. consent of the contracting parties
a. Commutative - equivalent values are stipulated/given (insurance) 2. object certain which is the subject matter of the contract
b. Aleatory - the benefit to each party depends upon chance 3. cause of the obligation which is established
b.special or those not common to all contracts or those which
According to name or designation must be present only in or peculiar to certain specified contracts
a. Nominate - given a specific name or designation in law 1. form: public instrument in donation of immovable property,
b. Innominate - not given; shall be regulated by the stipulations of real contracts, real estate/chattel mortgage
the parties, by the rules governing the most analogous 2. subject-matter: antichresis (real), pledge (personal)
nominate contracts, and by the customs of the place 3. consideration/cause: price (sale), liberality (commodatum)
Natural Elements Accidental Elements ● executors and administrators → the property of the estate
presumed to exist particular stipulations, clauses, terms, or ● public officers and employees → the property of the State or
in certain contracts conditions established by the parties, for the any subdivision, any government-owned/controlled corporation,
(warranty against purpose of clarifying, restricting, or modifying its or institution, of which has been entrusted to them; shall apply
eviction or hidden legal effects (conditions, period, interest, to judges and government experts who take part in the sale
defects in sale) penalty) and exist only when expressly provided
Instances wherein a minor's consent is valid
How is consent in a contract manifested? By the meeting of the a. for necessaries, such as food, sold and delivered
offer and acceptance of the thing and the cause of the contract. b. ratified by the guardian or with juridical approval
c. ratified by the minor, upon reaching the age of majority
I. Requisites of a Valid Offer d. where he is in estoppel because he misrepresented his age
❖ certain or definite and convincingly led other party to believe in his legal capacity
❖ made with the intent to be bound if the same is accepted
2) Mistake or error → the false notion of a thing or a fact material
What causes will render an offer ineffective?
● death, civil interdiction, insanity, or insolvency of either party Nature of mistake
before acceptance is conveyed Of fact: in general; Of law: a substantial mistake of fact, where a
● revocation, rejection or withdrawal of the offer before arise from ignorance party would not have consented if he knew the
acceptance is communicated or lack of knowledge) mistake. Hence, not every mistake will vitiate
● qualified acceptance of the offer as it is really a counter-offer consent and make a contract voidable.
● expiration of the period of time given to the offeree within which
he must signify his acceptance A. In order that mistake may vitiate consent, it must refer to:
➔ the substance of the thing which is the object of the contract, or
Suppose the offer has allowed the offeree a certain period to ➔ those conditions which have principally moved one or both
accept, may the offer be withdrawn even before the expiration of parties to enter into the contract, or
the period? Yes, except when: ➔ the identity or qualifications of one of the parties if it was the
➔ the offer has already been accepted same principal cause of the contract
➔ the option is founded upon a consideration as something
paid or promised B. Mistake of fact which does not vitiate consent
➔ error as regards the incidents of a thing or accidental qualities
Are business advertisements of Are advertisements calling for (house accessibility to transportation) not taken as the principal
things for sale definite offers? bidders definite offers? consideration (unless the error is caused by fraud)
They are not definite offers, but No. They are simply invitations to ➔ mistake as to quantity or amount; it only gives rise to its
mere invitations to make an offer. make proposals, and the correction, unless it goes to the essence of the contract
Their acceptance will not create a advertiser is not bound to accept ➔ error as regards the motives of the contract unless the motives
contract. the highest or lowest bidder. constitute a condition or cause of the contract
➔ mistake as regards the identity or qualifications of a party:
II. Requisites of a Valid Acceptance things or services > persons (except for when such identity or
❖ absolute and unqualified; must conform with all the terms and qualifications have been the principal cause of the contract like
conditions stated in the offer (qualified or conditional acceptance partnership, agency, commodatum, guaranty deposit)
will constitute a counter-offer) ➔ error which could have been avoided by the party alleging it, or
❖ must be known to the offeror: which refers to a fact known to him, or which he should have
➢ acceptance thru correspondence - a letter does not bind known by the exercise of ordinary diligence, or which is so patent
the offeror except from the time it came to his knowledge and obvious that nobody could have made it
➢ offer and acceptance thru agent - the principal is bound
from the time the acceptance is communicated to the agent 3) Violence → exists when in order to wrest consent serious or
irresistible force is employed; to vitiate consent, must be the reason
Characteristics of Consent why the other party gave his consent.
Intelligent: has free and voluntary: no conscious/spontaneous:
4) Intimidation → exists when one of the contracting parties is
capacity to act vitiation of consent by no vitiation of consent by
compelled by a reasonable and well-grounded fear of an imminent and
reason of violence or reason of mistake, undue
grave evil upon his, or upon the person or property of his spouse,
intimidation influence, or fraud
descendants or ascendants, to give his consent; to vitiate, the
Vices of consent consist in those causes or circumstances that vitiate intimidation must be the reason why the party entered into the contract
consent or render it defective so as to make the contract voidable: ❖ To determine the degree of the intimidation, the age, sex and
- Incapacity - Violence or force - Undue influence condition of the person shall be borne in mind.
- Mistake or error - Intimidation or threat - Fraud or deceit ❖ A threat to enforce one's claim through competent authority, if the
claim is just or legal, does not vitiate consent.
1) Incapacitated to give valid consent to contracts: ❖ Intimidation (or violence) may be employed by a third person who
a. unemancipated minors (under 18) did not take part in the contract. However, to make the contract
b. insane or demented persons (valid if entered during lucid voidable or annullable, it is necessary that the violence or
interval); and when in a state of drunkenness or hypnotic spell intimidation must be of the character required in Article 1335.
c. deaf mules who do not know how to read and write
d. persons suffering the accessory penalty of civil interdiction 5) Undue influence → exists when a person takes improper
advantage of his power over the will of another, depriving the latter of
Other persons specially disqualified: a reasonable freedom of choice
Article 1329. The incapacity declared in article 1327 (a) is subject to
the modifications determined by law, and is understood to be without Circumstance to consider in determining undue influence
prejudice to special disqualifications established in the laws. a. the relations between the parties such as the confidential,
family, spiritual and other relations between the parties
Article 1491. The following persons cannot acquire by purchase, b. the fact that the alleged unduly influenced person was suffering
even at a public or judicial auction, either in person or through the from mental weakness, was ignorant, or in financial distress
mediation of another:
● guardian → the property of person/s under his guardianship 6) Fraud as a vice of consent
● agents → the property whose administration or sale have been ➔ exists when through insidious words or machinations of one of
entrusted to them, unless the consent of the principal is given the parties, the other is induced to enter into a contract
➔ failure to disclose facts, when there is a duty to reveal them, as
when the parties are bound by confidential relations
Two kinds of fraud in the making of a contract:
Causal fraud, or fraud Incidental fraud, or fraud
employed to secure the consent likewise employed to secure the
of the other party, which is a consent of the other party but
ground for the annulment of a which only renders the party
contract, although it may also who employs it liable for
give rise to an action for damages. This kind of fraud
damages must not be confused with the
fraud in Articles 1170 and 1171
Causal fraud or dolo causante which refers to that occurring in
● employed by one party prior the performance of a
to or simultaneous with the pre-existing obligation under a
creation of the contract to contract without affecting the
secure the consent of the validity of the contract. Both
other kinds of incidental fraud do not
● used by a party to induce the vitiate consent.
other to enter into a contract
without which the latter would
not have agreed
How is causal fraud committed?
Through insidious words, machinations, or by concealment:
➔ false promises, exaggerated expectations or benefits, abuse of
confidence, fictitious names, qualities, or power
➔ can deceive a contracting party, producing a vitiated consent
and it is not necessary that they constitute estafa or partake of
any other criminal act subject to the penal law
Requisites of causal fraud
Not all forms of fraud can vitiate consent. In order that fraud may
vitiate consent and be a cause for the annulment of a contract, the
following requisites must be present:
● there must be misrepresentation or concealment by a party
prior to or simultaneous to the consent or creation of contract
● must be serious
● must have been employed by only one of the parties
Note: 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.
● must be made in bad faith or with intent to deceive the other
contracting party who had no knowledge of the fraud;
● must have induced the consent of the other contracting party
However,
Article 1340. The usual exaggerations in trade, when the other party
had an opportunity to know the facts, are not in themselves fraudulent.
Article 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.
Simulation of contract is the act of deliberately deceiving others, by
feigning or pretending by agreement the appearance of a contract
which is either non-existent or concealed or is different from that which
was really executed.
Kinds of simulation
Absolute simulation or when Relative simulation or when the
the contract does not really contract entered into by the parties is
exist and the parties do not different from their true agreement or
intend to be bound at all. the parties state a false cause in the
Absolutely simulated or contract to conceal their real
fictitious contracts are agreement. The parties are bound by
inexistent and void and are not their real agreement, provided, it
susceptible of ratification. The does not prejudice a third person and
parties may recover from each is not intended for a purpose contrary
other what they may have to law, morals, good customs, public
given under the "contract." order, or public policy.
The pari delicto rule does not apply where both the object and cause
are licit and the simulation is only on the content or terms thereof.
