CONTRACTS LAW

ATTY. REYAINE A. MENDOZA

GENERAL PROVISIONS (ART 1305- 1317)

PRINCIPAL CHARACTERISTICS:
1. Autonomy of Wills – parties may stipulate anything as log as not illegal, immoral, etc
2. Mutuality - performance or validity binds both parties; not left to the will of one of the parties
3. Obligatory Force – parties are bound from the perfection of contract
4. Fulfill what has been EXPRESSLY STIPULATED
5. All consequences which may be in keeping with good faith, usage and law
6. Relativity – binding only between the parties, their assigns, heirs; strangers cannot demand enforcement
KINDS OF CONTRACTS

1. As to perfection or formation
a. Consensual – perfected by agreement of parties
b. Real – perfected by delivery (cmmodatum, pledge, deposit)
c. Formal/Solemn – perfected by conformity to essential formalities (donation)
2. As to cause
a. Onerous – with valuable consideration
b. Gratuitous – founded on liberality
c. Remunerative – prestation is given for service previously rendered not as obligation
3. As to importance or dependence of one upon another
a. Principal – contract may stand alone
b. Accessory – depends on another contract for its existence; may not exist on its own
c. Preparatory – not an end by itself; a means through which future contracts may be made
KINDS OF CONTRACTS

4. As to parties obliged
a. Unilateral – only one of the parties has an obligation’
b. Bilateral – both parties are required to render reciprocal obligations
5. As to name or designation
a. Nominate
b. Innominate – those which are not given any names or designations
i. Do ut des – I give that you may give
ii. Do ut facias – I give that you may do
iii. Facio ut des – I do that you may give
iv. Facio ut facias – I do that you may do
KINDS OF CONTRACTS

INNOMINATE CONTRACTS SHALL BE GOVERENED BY THE FOLLOWING:

 Stipulations of the parties;
 Provision of Title I (Obligations) and Title II (Contracts) of this Code;
 Rules governing the most analogous nominate contracts; and
 Customs of the place.
STAGES IN A CONTRACT

1 2 3
PREPARATION – PERFECTION – birth CONSUMMATION
negotiation – performance
ESSENTIAL
REQUISITES OF A  CONSENT
CONTRACT  SUBJECT MATTER
(ART. 1318 –  CONSIDERATION
1355)
 CONSENT is the meeting of the minds between parties on
subject matter and cause of contract; concurrence of offer and
acceptance
REQUIREMENTS
 Plurality of subject
CONSENT  Capacity
 Intelligence and free will
 Manifestation of intent of parties
 Cognition by the other party
 Conformity of manifestation and cognition
ARTICLE 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. (1262a)
ARTICLE 1319

 Consent in contracts is giving of one’s conformity to the terms of the contract freely and voluntarily. It is the
concurrence of the minds of the parties on the cause and subject matter which will constitute the contract, as
well as on the other conditions and terms thereof to which they voluntarily binds themselves to comply.
Consent may be expressly or implied.
COLLECTIVE CONTRACTS

 Will of the majority binds a minority to an agreement

notwithstanding the opposition of the latter
CONTRACTS OF ADHESION

 One party has already a prepared form of a contract,

containing the stipulations he desires, and he simply asks
the other party to agree to them if he wants to enter
into the contract
ADHERENCE TO THEORY OF COGNITION

In the Philippines, we follow the theory of cognition and not the theory of
manifestation. Under our Civil Law, the offer and acceptance concur only
when the offeror comes o know, and not when the offeree merely
manifests his acceptance
CHARACTER OF THE OFFER

1) Certain,
2) Definite and
3) Concrete and
4) Acceptance
a. Absolute
b. Not conditional
WHEN OFFER BECOMES INEFFECTIVE:

1. Death, civil interdiction, insanity or insolvency of either party before

acceptance is conveyed
2. Express or implied revocation of the offer by the offeree
3. Qualified or conditional acceptance of the offer, which becomes a
counter offer
4. Subject matter becomes illegal or impossible before acceptance is
communicated
ACCEPTANCE OF OFFER

The acceptance made the party to an offer was made, binds the offeror
only from the time the offeror came to know of the acceptance.
The law presumes that the contract was perfected at the pace where the
offer was made , the place of origin of the conception of the contract.
PERIOD OF ACCEPTANCE

1. Stated fixed period in the offer

2. No stated fixed period
a. Offer is made to a person present – acceptance must be made immediately
b. Offer is made to a person absent – acceptance must be made within such time that, under normal
circumstances, an answer can be received from him
• Acceptance may be revoked before it comes to the knowledge of the offeror
RULE ON COMPLEX OFFERS

1. Offers are interrelated – contract is perfected if all the offers are accepted
2. Offers are not interrelated – single acceptance of each offer results in a perfected contract unless the offeror has
made it clear that one is dependent upon the other and acceptance of both is necessary
Malbrosa vs. CA: Offer inter prasentes must be accepted IMMEDIATELY. If the parties intended that there
should be an express acceptance, the contract will be perfected only upon knowledge by the offeror of the express
acceptance by the offerree of the offer. An acceptance which is not made in the manner prescribed by the offeror is
NOT EFFECTIVE, BUT A COUNTER OFFER which the offeror may accept or reject
RULE ON ADVERTISEMENTS AS OFFERS

1. Business advertisements – not a definite offer, but mere

invitation to make an offer, unless it appears otherwise
2. Advertisement for Bidders – only invitation to make
proposals and advertiser is not bound to accept the highest or
lowest bidder, unless appears otherwise
RULE ON OPTION

Option may be withdrawn anytime before acceptance is communicated but not when supported by a consideration
other than the purchase price (Option money)
• Ang Yu vs. CA: states that a unilateral promise to buy or sell, if not supported by a distinct consideration, amy be
withdrawn but may not be done whimsically or arbitrarily; the right of the grantee here is damages ad not specific
performance
• Equatorial v. Mayfair: held that an option clause in order to be valid and enforceable must indicate the definite
price at which the person granting the option is willing to sell, contract can be enforced and not only damages
PERSON WHO CANNOT GIVE CONSENT TO A CONTRACT

1. Minors
2. Insane or demented persons
3. Illiterates/ deaf-mutes who do not know how to write
4. Intoxicated and under hypnotic spell
5. Art 1331 – person under mistake; mistake may deprive intelligence
6. Art 1338 – person induced by fraud (dolo causante)

NOTE: Dolus bonus (usual exaggerations in trade) are not in themselves fraudulent
RULE ON CONTRACTS ENTERED INTO BY MINORS

GENERAL RULE:VOIDABLE CONTRACT – a valid contract but maybe annulled by one of the parties
EXCEPTIONS:
a. Upon reaching the age of majority – they ratify the same
b. They were entered into by a guardian and the court having jurisdiction had approved the same
c. They were contracts for necessities such as food, but here the persons who are bound to give them support
should pay therefor
d. Minor is estopped for having misrepresented his age and misled the other party
DISQUALIFIED TO ENTER INTO CONTRACTS

These contracts entered into are void:

1. Those under civil interdiction
2. Hospitalized lepers
3. Prodigals
4. Deaf and Dumb who are unable to read and write
5. Those by reason of age, disease, weak mind and other similar causes, cannot without outside aid, take care of
themselves and manage their property, becoming an easy prey for deceit and exploitation
CAUSES WHICH VITIATE FREEDOM
1. Violence
REQUISITES:
a. Irrisistible physical force
b. Such force is the determining cause for giving consent
2. Intimidation
REQUISITES:
a. Determining cause for the contract
b. Threatened act is unjust and unlawful
c. Real and serious
d. Produces a well grounded fear that the person making it will carry over
SIMULATE CONTRACTS

1. Absolute – no intention to be bound at all, fictitious only – void from the

beginning
2. Relative – there is intention to be bound but the intention is concealed,
the contract is binding if:
a. No prejudice to 3rd persons
b. Not contrary to law, morals, etc