OBLIGATIONS AND CONTRACTS

ATTY. GUIANNE JOYCE L. BAUTISTA, J.D

ARTICLE 1305: A CONTRACT IS
A MEETING OF MINDS
BETWEEN TWO PERSONS
WHEREBY ONE BINDS HIMSELF,
WITH RESPECT TO THE OTHER,
TO GIVE SOMETHING OR TO
RENDER SOME SERVICE.
 There are at least two parties
involved in a contract: an active
subject (creditor) and a passive
subject (debtor)

ARTICLE 1305: A
CONTRACT IS A MEETING An obligation is created because
OF MINDS BETWEEN TWO the passive subject promises to the
PERSONS WHEREBY ONE active subject the performance of a
BINDS HIMSELF, WITH prestation which is either to give
something, or render some service
RESPECT TO THE OTHER,
TO GIVE SOMETHING OR
TO RENDER SOME SERVICE.
By agreement between the parties,
a CIVIL OBLIGATION is created.
Thus, a distinction between an
agreement and contract must be
made.
 CONTRACT VS AGREEMENT

If two parties agree on If two parties agree

performance of a moral on performance of a
or social obligation, civil obligation, the
there is an agreement result is a contract
but there is no contract. which is legally
enforceable in court
 CONTRACT VS AGREEMENT

Agreement: A and B agreed Contract: A and B

that they will go to mass agreed that if A will
every Sunday at Parokya hear the mass for 5
ng Mabuting Pastol Parish, consecutive Sundays
in Magsaysay for 5 at Parokya ng
consecutive Sundays. Mabuting Pastol
Parish, B will give A
5,000.
 STAGES OF A CONTRACT

PREPARATORY OR CONCEPTION

PERFECTION OR BIRTH

CONSUMPTION OR FULFILLMENT
 PREPARATORY OR CONCEPTION

NEGOTIATION
PREPARATORY/
GENERATION
STAGE
BARGAINING PROCESS
 PERFECTION OR BIRTH

OFFER

PERFECTION OF
CONTRACT

ACCEPTANCE
 CONSUMPTION OR FULFILLMENT

FULFILLMENT OF
RESPECTIVE
OBLIGATIONS
DEATH OF THE
CONTRACT

EXTINGUISHMENT
BASIC PRINCIPLES GOVERNING
CONTRACTS

AUTONOMY OF CONTRACTS (ARTICLE 1306)

MUTUALITY OF CONTRACTS (ARTICLE 1308)

RELATIVITY OF CONTRACTS (ARTICLE 1311)

CONSENSUALITY OF CONTRACTS (ARTICLE 1315)

OBLIGATORY FORCE OF CONTRACTS (ARTICLE 1159)

 AUTONOMY OF CONTRACTS

THE CONTRACTING PARTIES MAY

ESTABLISH SUCH STIPULATIONS, CLAUSES,
TERMS AND CONDITIONS AS THEY MAY
DEEM CONVENIENT, PROVIDED ,THEY ARE
NOT CONTRARY TO LAW, MORALS, GOOD
CUSTOMS, PUBLIC ORDER, AND PUBLIC
POLICY
 AUTONOMY OF CONTRACTS

GENERAL RULE: CONTRACTING PARTIES ARE

FREE TO CREATE AND STIPULATE ON ANY
CLAUSES, TERMS AND CONDITIONS IN THEIR
CONTRACT.
EXCEPTION: MUST NOT BE CONTRARY TO LAW,
MORALS, GOOD CUSTOMS, PUBLIC ORDER, AND
PUBLIC POLICY
 LIMITATIONS ON CONTRACTUAL
STIPULATIONS: LAW

LAW IS A FUNDAMENTAL REQUIREMENT THAT

THE CONTRACT ENTERED INTO MUST BE IN
ACCORDANCE WITH, AND NOT REPUGNANT TO
AN APPLICABLE STATUTE.
CONTRACT MUST NOT BE CONTRARY TO LAW. IF
CONTRARY TO LAW, CONTRACT CANNOT BE
GIVEN EFFECT BECAUSE LAW IS SUPERIOR TO A
CONTRACT.
 LIMITATIONS ON CONTRACTUAL
STIPULATIONS: MORALS
MORALS DEAL WITH NORMS OF GOOD AND
RIGHT CONDUCT EVOLVED IN A COMMUNITY.
CONTRACT MUST NOT BE CONTRARY TO
MORALS.
EXAMPLE: A CONTRACT WHEREBY B PROMISED
TO LIVE AS COMMON LAW WIFE OF C WITHOUT
MARRIAGE IN CONSIDERATION OF 50K, IS
IMMORAL AND THEREFORE, VOID.
 LIMITATIONS ON CONTRACTUAL
STIPULATIONS: CUSTOMS

CUSTOMS CONSIST OF HABITS AND PRACTICES WHICH

THROUGH LONG USAGE HAVE BEEN FOLLOWED AND
ENFORCED BY SOCIETY AS BINDING RULES OF
CONDUCT.
EXAMPLE: A promised to give B 100,000 if B will
slap his father on both cheeks. This contract is
void because it is against the good custom of
showing respect to our parents.
 LIMITATIONS ON CONTRACTUAL
STIPULATIONS: PUBLIC ORDER

PUBLIC ORDER REFERS PRINCIPALLY TO PUBLIC SAFETY.

EXAMPLE: A and B entered into a contract of

lease. One of the conditions mentioned in the
contract is that in case of failure to pay rentals,
and B refuses to leave the apartment, A will ask
his two wrestler brothers to drag B out of the
apartment.
 LIMITATIONS ON CONTRACTUAL
STIPULATIONS: PUBLIC POLICY

PUBLIC POLICY REFERS NOT ONLY TO PUBLIC SAFETY

BUT ALSO TO CONSIDERATIONS WHICH ARE MOVED BY
THE COMMON GOOD.

EXAMPLE: A contract entered into by a

prosecutor not to prosecute a carnapper in
consideration of 30,000 is against the public
policy to punish and prosecute people for their
crimes.
 MUTUALITY OF CONTRACTS

CONTRACTS MUST BIND BOTH AND

NOT ONE OF THE CONTRACTING
PARTIES; THEIR VALIDITY OR
COMPLIANCE CANNOT BE LEFT TO
THE WILL OF ONE OF THEM.
 MUTUALITY OF CONTRACTS

Contracts are agreed upon by

MUTUAL CONSENT. Hence, their
compliance or validity must also be
mutual. By principle, no party to a
contract can renounce or violate
the law of contract without the
consent of the other.
 ILLUSTRATIVE CASE

S promised to sell his car to B, an

interested buyer. It was agreed that S will
determine the price of the car and inform B
about it on the same day that S will deliver
the car. The following day, S went to the
house of B to deliver the car and to collect
the purchase price of 3.5M.
 ILLUSTRATIVE CASE

Question: Can S compel B to accept

delivery of the car and to pay the
purchase price of 3.5M?
 ILLUSTRATIVE CASE

No. There is no valid contract. A contract is

a meeting of the minds and, therefore,
there must be mutual consent. The
contract does not bind both contracting
parties because the determination is left
solely on S. Unless, B decides to accept the
delivery and agrees to the purchase price.
In which case, the contract is perfected.
 MUTUALITY OF CONTRACTS

ARTICLE 1309. THE DETERMINATION

OF THE PERFORMANCE MAY BE LEFT
TO A THIRD PERSON, WHOSE
DECISION SHALL NOT BE BINDING
UNTIL IT HAS BEEN MADE KNOWN TO
BOTH CONTRACTING PARTIES.
 MUTUALITY OF CONTRACTS

Note: While compliance with a contract

cannot be left to the will of only one of
the contracting parties, the
determination of its performance may
be left to a third person. The
determination, however will bind the
parties only after it has been made
known to BOTH of them.
 MUTUALITY OF CONTRACTS

ARTIXLE 1310. THE DETERMINATION

SHALL NOT BE OBLIGATORY IF IT IS
EVIDENTLY INEQUITABLE. IN SUCH
CASE, THE COURTS SHALL DECIDE
WHAT IS EQUITABLE UNDER THE
CIRCUMSTANCES.
GENERAL RULE: WHATEVER
DETERMINATION MADE BY THE THIRD
PERSON SHALL BIND BOTH PARTIES

EXCEPTION: WHEN IT IS EVIDENTLY

INIQUITOUS, IN WHICH CASE COURT
SHALL DECIDE WHATEVER IS FAIR.
Note: A contracting party is not bound by the
determination if it is evidently inequitable or
unjust as when the third person acted in bad
faith or by mistake.
 RELATIVITY OF CONTRACTS

ARTICLE 1311. CONTRACTS TAKE EFFECT ONLY

BETWEEN THE PARTIES, THEIR ASSIGNS AND
HEIRS, EXCEPT IN CASE WHERE THE RIGHTS
AND OBLIGATIONS ARISING FROM THE
CONTRACT ARE NOT TRANSMISSIBLE BY THEIR
NATURE, OR BY STIPULATION OR BY PROVISION
OF LAW. THE HEIR IS NOT LIABLE BEYOND THE
VALUE OF THE PROPERTY HE RECEIVED FROM
THE DECEDENT.
 RELATIVITY OF CONTRACTS

GENERAL RULE: CONTRACTS CAN ONLY BIND THE

PARTIES WHO ENTERED INTO IT, AND CANNOT
FAVOR OR PREJUDICE A THIRD PERSON, EVEN IF HE
IS AWARE OF SUCH CONTRACT AND HAS ACTED
WITH KNOWLEDGE THEREOF.

WHERE THERE IS NO PRIVITY OF CONTRACT, THERE

IS LIKEWISE NO OBLIGATION OR LIABILITY TO SPEAK
ABOUT
 RELATIVITY OF CONTRACTS

EXCEPTION: MAY ALSO BIND THEIR ASSIGNS AND

HEIRS, AS THE OBLIGATIONS THAT CONTRACT MAY
CREATE MAY BE ASSIGNED OR ASSUMED BY
ANOTHER.

EXCEPTION TO THE EXCEPTION: CONTRACTUAL

RIGHTS AND OBLIGATIONS ARE NOT TRANSMISSIBLE
IF THE OBLIGATIONS INVOLVED ARE PURELY
PERSONAL IN NATURE.
 INSTANCES WHERE A THIRD PERSON
MAY BE AFFECTED BY A CONTRACT

ARTICLE 1311, PARAGRAPH 2: IF A CONTRACT

SHOULD CONTAIN SOME STIPULATION IN FAVOR OF A
THIRD PERSON, HE MAY DEMAND ITS FULFILLMENT
PROVIDED HE COMMUNICATED HIS ACCEPTANCE TO
THE OBLIGOR BEFORE ITS REVOCATION. A MERE
INCIDENTAL BENEFIT OR INTEREST OF A PERSON IS
NOT SUFFICIENT. THE CONTRACTING PARTIES MUST
HAVE CLEARLY AND DELIBERATELY CONFERRED A
FAVOR UPON A THIRD PERSON.
 ELEMENTS OF STIPUL ATION POUR AUTRUI

THERE IS A STIPULATION IN FAVOR OF A THIRD

PERSON

THE STIPULATION IS A PART, NOT THE WHOLE

OF THE CONTRACT
THE CONTRACTING PARTIES CLEARLT AND
STIPULATION POUR DELIBERATELY CONFERRED A FAVOR RO THIRD
AUTRUI IS A PERSON; FAVOR IS NOT MERELY INCIDENTAL
STIPULATION IN FAVOR FAVOR IS UNCONDITIONAL AND
OF A THIRD PERSON. UNCOMPENSATED

THIRD PERSON COMMUNICATED HIS

ACCEPTANCE BEFORE REVOCATION

PARTIES DO NOT REPRESENT, OR ARE NOT

AUTHORIZED, BY THE THIRD PARTY.
 ILLUSTRATIVE CASE

PHOEBE CONTRACTED MONICA TO COOK FOR HER WHEN SHE HOSTS A

DINNER DATE WITH MIKE. PHOEBE AND MONICA THEN AGREED THAT PHOEBE
SHALL DELIVER THE PAYMENT TO RACHEL.
HERE:
A. AFTER MONICA RENDERS HER SERVICES, PHOEBE IS NOT YET OBLIGATED
TO DELIVER PAYMENT TO RACHEL UNTIL RACHEL SIGNIFIES HER CONSENT
TO THE AGREEMENT;
B. EVEN IF SHE DID NOT SIGNIFY HER CONSENT, IF PHOEBE DELIVERS THE
MONEY AND RACHEL ACCEPTS IT, THEN RACHEL IS BOUND BY THE
CONTRACT BETWEEN PHOEBE AND MONICA;
C. BEFORE RACHEL GIVES HER CONSENT TO ANY PAYMENT, PHOEBE AND
MONICA CAN CHANGE THEIR AGREEMENT AS TO PAYMENT TO RACHEL;
D. ONCE RACHEL GIVES HER CONSENT, PHOEBE AND MONICA CAN NO
LONGER CHANGE THE AGREEMENT.
 I N S TA N C E S W H E R E A T H I R D P E R S O N M AY B E A F F E C T E D BY A
C O N T RA C T

ARTICLE 1312. 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.
 CONTRACTS CREATING REAL RIGHTS

GENERAL RULE: THIRD PERSONS HAVE NOTHING

TO DO WITH CONTRACTS ENTERED INTO BY OTHER
PERSONS.
EXCEPTION: THIRD PERSONS ARE BOUND BY
CONTRACTS CREATING REAL RIGHTS WHEN THIRD
PERSON COMES INTO POSSESSION OF THE
CONTRACT.

A Real right is binding against the

whole world and attaches to the
property over which it is exercised
wherever it goes.
 ILLUSTRATIVE CASE

A leases his property to B. B then registers

such lease. Later, with the consent of B, A
sells the same property to C. C, who is an
outsider to the lease contract between A and
B, has become the buyer of the object of
contract of lease. He must honor the lease
contract between A and B.
 INSTANCES WHERE A THIRD PERSON MAY BE
AFFECTED BY A CONTRACT
In contracts entered into to defraud
creditors:

ARTICLE 1313. CREDITORS ARE PROTECTED

IN CASES OF CONTRACTS INTENDED TO
DEFRAUD THEM.
This article represents another instance
when an outsider can interfere with
another’s contract.
 INSTANCES WHERE A THIRD PERSON MAY BE
AFFECTED BY A CONTRACT

In contracts which have been violated at the

inducement of a third person:

ARTICLE 1314. ANY THIRD PERSON WHO INDUCES

ANOTHER TO VIOLATE HIS CONTRACT SHALL BE LIABLE
FOR DAMAGES TO THE OTHER CONTRACTING PARTY
This article recognizes an instance when a
stranger to a contract can be sued for
damages for his unwarranted interference
with the contract.
 CONSENSUALITY OF CONTRACTS

ARTICLE 1315. CONTRACTS ARE PERFECTED

BY MERE CONSENT, AND FROM THE MOMENT
THE PARTIES ARE BOUND NOT ONLY TO THE
FULFILLMENT OF WHAT HAS BEEN EXPRESSLY
STIPULATED BUT ALSO TO ALL THE
CONSEQUENCES WHICH, ACCORDING TO
THEIR NATURE MAY BE IN KEEPING WITH
GOOD FAITH, USAGE AND LAW.
 REAL CONTRACT

ARTICLE 1316. REAL CONTRACTS,

SUCH AS DEPOSIT, PLEDGE, AND
COMMODATUM, ARE NOT
PERFECTED UNTIL THE DELIVERY OF
THE OBJECT OF THE OBLIGATION.
 CLASSIFICATION OF CONTRACTS
ACCORDING TO PERFECTION

A. CONSENSUAL CONTRACTS OR THOSE

PERFECTED BY MERE CONSENT OF THE
PARTIES;
B. REAL CONTRACTS OR THOSE PERFECTED,
IN ADDITION TO THE ABOVE, BY THE
DELIVERY OF THE THING WHICH IS THE
SUBJECT MATTER OF THE CONTRACT.
 CONSENSUAL CONTRACT
Contract of sale is an example of a consensual
contract.

On November 3, 2023, S promised to sell his car

to B for 2.7M. It was agreed that the delivery and
payment be made on November 9, 2023. On said
date, S refused to deliver the car stating that he
had changed his mind.

Question: Was there a perfected contract

between S and B?
 CONSENSUAL CONTRACT

Answer: Yes, As of November 3, 2023, there was

already a perfected contract of sale because as of
that date, there was already consent on the part
of both the contracting parties, there was an
object (the delivery of the car), and there was a
cause (payment of 2.7M purchase price). Hence,
S and B are bound to fulfil their respective
obligations. S can no longer back out from his
obligation unless he is willing to be liable for
damages to B for the breach of contract.
 OBLIGATORY FORCE OF CONTRACT

ARTICLE 1159. OBLIGATIONS ARISING

FROM CONTRACTS HAVE THE FORCE OF
LAW BETWEEN THE CONTRACTING
PARTIES AND SHOULD BE COMPLIED
WITH IN GOOD FAITH.
ELEMENTS OF A
CONTRACT
 CLASSES OF ELEMENTS OF
CONTRACTS

1. ESSENTIAL ELEMENTS OR THOSE WITHOUT WHICH

NO CONTRACT CAN VALIDLY EXISTS;
2. NATURAL ELEMENTS OR THOSE THAT ARE
PRESUMED TO EXIST IN CERTAIN CONTRACTS
UNLESS THE CONTRARY IS EXPRESSLY STIPULATED
BY THE PARTIES
3. ACCIDENTAL ELEMENTS OR PARTICULAR
STIPULATIONS, CLAUSES, TERMS OR CONDITIONS
ESTABLISHED BY PARTIES IN THEIR CONTRACT.
 ESSENTIAL REQUISITES OF
CONTRACTS

ARTICLE 1318. THERE IS NO CONTRACT UNLESS THE

FOLLOWING REQUISITES CONCUR:

1. CONSENT OF THE CONTRACTING PARTIES;

2. OBJECT CERTAIN WHICH IS THE SUBJECT MATTER OF
THE CONTRACT;
3. CAUSE OF THE OBLIGATION WHICH IS ESTABLISHED.
 CONSENT

ARTICLE 1319. CONSENT IS MANIFESTED BY THE

MEETING OF THE OFFER AND THE ACCEPTANCE
UPON THE THING AND THE CAUSE WHICH ARE
TO CONSTITUTE A CONTRACT. THE OFFER MUST
BE CERTAIN AND THE ACCEPTANCE IS
ABSOLUTE. A QUALIFIED ACCEPTANCE
CONSTITUTES A COUNTER-OFFER.
 CONSENT

ARTICLE 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 IS MADE.
 CONSENT

AGREEMENT OF THE WILL OF ONE OF THE

CONTRACTING PARTY WITH THAT OF ANOTHER,
UPON THE OBJECT AND CAUSE OF THE
CONTRACT.
 OFFER

PROPOSAL MADE BY ONE PARTY TO ANOTHER

TO ENTER INTO A CONTRACT. IT IS MORE THAN
AN EXPRESSION OF DESIRE. IT IS A PROMISE TO
ACT OR REFRAIN FROM ACTING ON CONDITION
THAT THE TERMS THEREOF ARE ACCEPTED THE
PERSON TO WHOM IT IS MADE.

OFFER MUST BE CERTAIN

 ACCEPTANCE

MANIFESTATION BY THE OFFEREE

OF HIS ASSENT TO THE TERMS OF
THE OFFER.

ACCEPTANCE MUST BE ABSOLUTE.

 MEETING OF THE
CONSENT MINDS

ACCEPTANC
OFFER E
 EXAMPLES

Will you buy this ring for 25,000? Is this considered as an offer?

I am willing to consider the sale of my ring to you for 25,000. Is

this considered as an offer?

I am willing to buy your car.. Is this considered as an offer?

 ILLUSTRATIVE CASE

B wrote S a letter which began as follows:

“In connection with yacht sale, I am in
position and am willing to entertain the
purchase under the following terms …” To
this letter, S affixed his signature at the
bottom thereof just below that of B as
follows: “Proposition accepted, signed S”
 ILLUSTRATIVE CASE

Issue: Is the letter a definite offer by B to

purchase the yacht, such that by its
acceptance, B may be compelled to
purchase the yacht?
 ILLUSTRATIVE CASE

Answer: NO. B instead of using the

expressions, “I want to purchase”, “I offer to
purchase”, “I am in position to purchase” used
the following words “I am in position and am
willing to entertain”. The word entertain does
not mean resolution to perform the act but
simply a position to deliberate for deciding to
perform or not. It is not a definite offer.
 ILLUSTRATIVE CASE

Facts: S offered to sell his hacienda to B for 1M

Philippine currency in cash should the latter
indicate his acceptance on or before
November 11 otherwise, S will sell the
hacienda to others. B sent a reply saying that
“I am very much interested to buy and acquire
your hacienda in the same price, manner,
condition and considerations other buyers will
offer.”
Issue: Is there an acceptance of the offer?
 ILLUSTRATIVE CASE

None. B’s reply is an indication that he

would await the offer of any prospective
buyer. There is no acceptance in this
case.
 ACCEPTANCE MADE BY LETTER OR
TELEGRAM

1. Knowledge of the acceptance: if

transmitted by letter or telegram,
contract is perfected not from the time
the letter or telegram is sent but from
the time of the offerer’s knowledge,
actual or constructive, of the
acceptance.
 ACCEPTANCE MADE BY LETTER OR
TELEGRAM

2. Revocation of the offer: Before acceptance is

known, the offer can be revoked.

3. Revocation of the acceptance: Offeree may

revoke the acceptance he has already sent,
provided that the revocation reaches the offeror
before the latter learns of the acceptance
 ACCEPTANCE MADE BY LETTER OR
TELEGRAM

In short, BOTH the offer and

acceptance may be revoked before
the contract is perfected which takes
place from the time the acceptance
comes to the offeror’s knowledge.
 An implied acceptance is one that is inferred from act or
conduct.

ARTICLE 1320. AN ACCEPTANCE MAY BE

EXPRESS OR IMPLIED.
Except when formal acceptance is required, acceptance may be shown by acts,
conduct or words of the accepting party that clearly manifest the present
intention to accept the offer of the other party.

An express acceptance may be oral or written.

 ACCEPTANCE

ACCEPTANCE BY PROMISE ACCEPTANCE BY ACT

An offer of a promise or an An acceptance of an offer

act may be accepted by may be by act, as where an
giving a promise as where a offer is made that the offerer
person offers to deliver to will do something else , if the
another a certain thing if the offeree shall do a particular
latter will pay a certain thing. In such case,
amount, and the other performance is the only thing
accepts by promising to pay needful to complete the
according to the conditions of agreement and create a
the offer. binding promise.
 ACCEPTANCE BY SILENCE OR INACTION

GENERAL RULE: Silence cannot be construed as

acceptance. Acceptance must be affirmatively and clearly
made, evidenced by words or some acts or conduct
communicated to the offeror.
EXCEPTIONS:

1. Where the parties agree expressly or impliedly, that it shall

amount to acceptance;
2. Where specific provisions of law so declare (Articles 1670,
1870-1873);
3. Where under the circumstances such silence constitutes
estoppel (Article 1431).
 MATTERS THAT MAY BE FIXED BY THE OFFERER

ARTICLE 1321. THE PERSON MAKING THE OFFER MAY FIX

THE TIME, PLACE, AND MANNER OF ACCEPTANCE, ALL OF
WHICH MUST BE COMPLIED WITH.
EFFECT OF NON-COMPLIANCE: OFFER SHALL BE DEEMED TERMINATED.
OFFER SHALL ALSO BE TERMINATED WHEN IT IS REJECTED BY THE
OFFEREE.
AN ACCEPTANCE DEPARTING FROM TERMS OF THE OFFER CONSTITUTES A COUNTER-
OFFER. COUNTER-OFFER HAS THE EFFECT OF EXTINGUISHING THE OFFER. IT, IN
EFFECT, CONSTITUTES A NEW OFFER WHICH THE ORIGINAL OFFERED MAY ACCEPT
OR REJECT.
WHEN OFFEROR HAS NOT FIXED A PERIOD FOR THE OFFEREE TO ACCEPT THE OFFER,
AND OFFER IS MADE TO A PERSON PRESENT, THE ACCEPTANCE MUST BE MADE
IMMEDIATELY; HENCE, OFFEREE CANNOT COMPLAIN THAT HE WAS NOT GIVEN A
REASONABLE PERIOD OF TIME WITHIN WHICH TO ACCEPT OR REJECT THE OFFER.
 COMMUNICATION OF ACCEPTANCE THROUGH AGENT

ARTICLE 1322. AN OFFER MADE THROUGH AN AGENT IS

ACCEPTED FROM THE TIME ACCEPTANCE IS
COMMUNICATED TO HIM.

For a contract to arise, acceptance must be made known to the offeror. By legal fiction, an
agent is considered an extension of the personality of his principal. If duly authorized, the
act of the agent, is in law, the act of the principal.

Article 1322 applies only if the offer is made through the agent and the acceptance is
communicated through him. Hence, there is no meeting of the minds if the principal
himself made the offer and the acceptance is communicated to the agent, unless the
latter is authorized to receive the acceptance.
 WHEN OFFER BECOMES INEFFECTIVE

ARTICLE 1323. AN OFFER BECOMES INEFFECTIVE UPON

DEATH, CIVIL INTERDICTION, INSANITY, INSOLVENCY OF
EITHER PARTY BEFORE ACCEPTANCE IS CONVEYED.

GR: An offer may be withdrawn before it is accepted. After

acceptance, the contract is perfected. (Article 1319)
Exception: Even if the offer is not withdrawn, its acceptance will not produce a meeting of
minds in case the offer has already become ineffective because of:
a. Death;
b. Civil interdiction (refers to the legal act of depriving a person of his right to handle his
own affairs);
c. Insanity;
d. Insolvency of either party before conveyance of the acceptance to the offeror.
ARTICLE 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 CONSIDERATION, AS
SOMETHING PAID OR PROMISED.
GR: When the offerer gives to the offeree a certain period within
which to accept the offer, that offer may be withdrawn as a matter of
right at any time before acceptance.
Exception: When the option is founded upon a consideration, as
something paid or promised.
In other words, the option binds the offerer not to enter into the principal contract with any
other person during the period fixed, and within the period, to enter into such contract with
the offeree, if the latter decide to use the option.
 ILLUSTRATIVE CASE

A offers to construct the house of B for a very reasonable price

of 2,000,000 giving B 10 days within which to decide. Under
Article 1324, A may withdraw the offer even before the lapse of
10 days unless B has already accepted the offer. After
acceptance, withdrawal is not possible as there is no more offer
to withdraw.

Even before acceptance, A may NOT withdraw the offer if the

option is covered by a consideration as when B paid or promised
to pay a sum of money to A for giving him a 10 day period.
There is an option contract in this case. After the 10 day period,
in the absence of acceptance, the offer becomes effective.
 Option Contract is a preparatory
Option period is the period given contract giving a person for
within which the offeree must
decide whether or not to enter into
consideration, a certain period
the principal contract. and under special conditions to
accept the offer of the offerer.
ARTICLE 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 CONSIDERATION, AS
SOMETHING PAID OR PROMISED.
Option money is the Option refers to the right
money paid or or privilege given to the
promised to be paid as
offeree to accept an offer
a DISTINCT
consideration for an within a certain period
option contract.
ARTICLE 1325. UNLESS IT APPEARS OTHERWISE,
BUSINESS ADVERTISEMENTS OF THINGS FOR SALE
ARE NOT DEFINITE OFFERS, BUT MERE
INVITATIONS TO MAKE AN OFFER.
GR: BUSINESS ADVERTISEMENTS OF THINGS FOR SALE ARE NOT DEFINITE OFFERS,
THEY ARE JUST INVITATIONS TO MAKE AN OFFER. (EXAMPLE: FOR SALE: 2000 SQM
LOT AT GREEN PLAINS VILLAGE, QUEZON CITY FOR 15M ---- IF INTERESTED CALL
TELEPHONE NUMBER 817-12-84. THIS IS NOT A DEFINITE OFFER.)

EXCEPTION: 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. (EXAMPLE: FOR SALE: 2000 SQM
LOT AT GREEN PLAINS VILLAGE, QUEZON CITY, LOCATED AT THE CORNER AT THE
CORNER OF GERONIMO AND MAGALLANES STREETS FOR 15M CASH---- TELEPHONE
NUMBER 817-12-84. THIS IS A DEFINITE OFFER.)
GR: AN OFFER IS MADE TO A PARTICULAR PERSON AND ONLY
SUCH PERSON, AND NO OTHER CAN ACCEPT THE OFFER.
(THIS IS BECAUSE A PARTY HAS A RIGHT TO SELECT AND
DETERMINE WITH WHOM HE WILL CONTRACT, AND CANNOT
HAVE ANOTHER PERSON THRUST UPON HIM WITHOUT HIS
CONSENT.)
EXCEPTION: GENERAL OFFER.
THE PRINCIPLE IS THAT A GENERAL OFFER MADE TO THE PUBLIC, OR
TO A PARTICULAR CLASS OF PERSONS, MAY BE ACCEPTED BY ANY ONE
OR BY ANY ONE COMING WITHIN THE DESCRIPTION OF THE CLASS FOR
EXAMPLE, AN OFFER OF A PRIZE FOR A DESIGN FOR A PUBLIC
BUILDING. SUCH OFFERS, ALTHOUGH MADE TO AN UNASCERTAINED
PERSON OR PERSONS, CANNOT, BE TURNED INTO AGREEMENT UNTIL
THEY HAVE BEEN ACCEPTED BY ASCERTAINED PERSON.
ARTICLE 1326. ADVERTISEMENTS FOR BIDDERS ARE SIMPLY
INVITATIONS TO MAKE PROPOSALS, AND THE ADVERTISER IS
NOT BOUND TO ACCEPT THE HIGHEST OR LOWEST BIDDER,
UNLESS CONTRARY APPEARS.

IN 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.
ACCEPTANCE BY ADVERTISER IS NECESSARY FOR A CONTRACT TO EXIST.
ADVERTISER IS NOT BOUND TO ACCEPT THE HIGHEST OR LOWEST BIDDER
UNLESS THE CONTRARY APPEARS.
ARTICLE 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.
UNEMANCIPATED MINOR refer to person who has not yet reached the age of
majority (18 years) and are still subject to parental authority.

FOR INSANE OR DEMENTED PERSONS, the insanity must exist at the time of
contracting.

If the DEAF-MUTES know how to write , contract is valid for then he is capable
of giving intelligent consent. A person who does not know how to write, does
not know how to read: and the one who knows how to read necessarily knows
how to write.
ARTICLE 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.
PERSONS INCAPACITATED TO GIVE CONSENT:
A. MINORS, EXCEPT:
i. Minor actively misrepresents his age (estoppel)
ii. Contracts entered into by guardians or legal representatives;
iii. When upon reaching the age of majority they ratify the same;
iv. When a minor opens a savings account without the assistance of his
parents, provided that the minor is at least 7 years old and can read and
write.
ARTICLE 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.
PERSONS INCAPACITATED TO GIVE CONSENT: INSANE OR DEMENTED
PERSONS unless they contract during lucid interval. Lucid interval is a
temporary period of sanity. It must be shown, however, that there is a full
return of the mind to sanity as to enable him to understand the contract he is
entering into.

EFFECT IF DRUNKENNESS AND HYPNOTIC SPELL: VOIDABLE CONTRACT

Drunkenness and hypnotic spell impair the capacity of a person to give
intelligent consent.
ARTICLE 1329. THE INCAPACITY DECLARED IN ARTICLE 1327
IS SUBJECT TO THE MODIFCATIONS DETERMINED BY LAW,
AND IS UNDERSTOOD TO BE WITHOUT PREJUDICE TO
SPECIAL DISQUALIFICATIONS ESTABLISHED IN THE LAWS.
PERSONS INCAPACITATED TO GIVE CONSENT:
MINORS, EXCEPT:
i. Minor actively misrepresents his age (estoppel)
ii. Contracts entered into by guardians or legal representatives;
iii. When upon reaching the age of majority they ratify the same;
iv. When a minor opens a savings account without the assistance of his
parents, provided that the minor is at least 7 years old and can read and
write.
ARTICLE 1330. A CONTRACT WHERE CONSENT IS GIVEN
THROUGH MISTAKE, VIOLENCE, INTIMIDATION, UNDUE
INFLUENCE, OR FRAUD IS VOIDABLE.

CHARACTERISTICS OF CONSENT:
1. IT IS INTELLIGENT- There is legal capacity to act. Consent must be given
with an exact notion over the thing consented to or the matter to which it
refers.
2. IT IS FREE AND VOLUNTARY: there is no vitiation of consent by reason of
force or intimidation; and
3. IT IS CONSCIOUS OR SPONATEOUS: there is no vitiation of consent by
reason of mistake, undue influence or fraud.
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 THOSE
CONDITIONS WHICH HAVE PRINCIPALLY MOVED ONE OR
BOTH PARTIES TO ENTER INTO 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.
IN ORDER THAT MISTAKE MAY VITIATE CONSENT, MISTAKE MUST
REFER TO:

1. THE SUBSTANCE OF THE THING WHICH IS THE OBJECT OF THE

CONTRACT;
2. THOSE CONDITIONS WHICH HAVE PRINCIPALLY MOVED ONE OR
BOTH PARTIES TO ENETR INTO CONTRACT; OR
3. THE IDENTITY OR QUALIFICATIONS OF ONE OF THE PARTIES,
PROVIDED, THE SAME WAS THE PRINCIPAL CAUSE OF THE
CONTRACT.
MISTAKE MUST BE SUBSTANTIAL, THAT IS, THE PARTY WOULD NOT HAVE ENTERED INTO
THE CONTRACT OR GIVE HIS CONSENT HAD HE KNOWN OF THE MISTAKE.

MISTAKE MUST BE MATERIAL AS TO GO THE ESSENCE OR PRINCIPAL CAUSE OF THE

CONTRACT.
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 FORCING THE CONTRACT MUST SHOW THAT
THE TERMS THEREOF HAVE BEEN FULLY EXPLAINED TO THE
FORMER.
GR: When a person signs a document, the presumption is that he does
so with full knowledge of its contents and consequences. Should he
later on alleged fraud or mistake, it is incumbent upon him to prove
his allegation.
EXN: Article 1332. When 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 has the duty to show that there has been
no fraud or mistake and that the terms of the contract have been fully
explained in the language known to the other.
ARTICLE 1333. THERE IS NO MISTAKE IF THE PARTY
ALLEGING IT KNEW THE DOUBT, CONTINGENCY OR
RISK AFFECTING THE OBJECT OF THE CONTRACT.

EFFECT OF KNOWLEDGE OF RISK: CANNOT CLAIM MISTAKE.

EXAMPLE: B bought a parcel of land from S who informed him before

the contract was perfected that the land was involved in litigation in
which C is the claimant. In case the land is later on recovered by C, B
cannot allege mistake in his contract because he knew the risk that
the land might later on be recovered by C.