Atty. Jal A.

Marquez
Law on Contracts
Articles 1305-1346
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x---------------------------x

Contracts (Articles 1305-1422) requisite which must be present only in

certain contracts.

DEFINITION OF A CONTRACT EXAMPLES:

Article 1305 1. Contract of Sale

A contract is a meeting of minds between S sells a watch to B for P5,000
two persons whereby one binds himself, Re S: Object – watch
with respect to the other, to give something Cause – price/P,5,000
or to render some service.
Re B: Object – price/P,5,000
CONTRACT and OBLIGATION Cause - watch
distinguished
2. Contract of Lease
Contract Obligation A leases the apartment of B for
 One of the  A legal tie or P10,000/mo.
sources of relation itself that Re A (lesee): Object – apartment
obligations (Art exists after a Cause – P10,000/mo.
1157) contract has been
entered into Re B (lessor): Object – P10,000/mo.
Cause - apartment
NOTES:
 There can be no contract if there is no (1) CONSENT (Art. 1319)
obligation. But there can be an obligation The conformity or concurrence of wills
without a contract. (meeting of the offer and the acceptance
 The kind of contract entered into is not upon the thing and cause)
determined by the name or title given to it
by the parties but by its nature or WHO CANNOT GIVE CONSENT (Art. 1327)
character as determined by principle of (Others under the Rules of Court and other
law. provisions shall be later discussed)

CONTRACT and AGREEMENT 1. Unemancipated minors

distinguished 2. Insane
3. Demented
Contract Agreement 4. Deaf-mutes who do not know how to
write
 Agreements  Moral or
that are Social agreements
(2) OBJECT (Art. 1347-1348)
enforceable that are
The SUBJECT MATTER. The thing, service,
through legal unenforceable
or right.
proceedings through legal
proceedings (e.g.,
REQUISITES OF THINGS/ SERVICES/
agreement to go
RIGHTS AS OBJECT
to a dance party)
 Broader than
1. Must be within the commerce of men,
a contract as it
that is, it can legally be the subject of
may not have all
commercial transaction (e.g., OUTSIDE
the elements of a
the commerce of men: public
contract
ownership such as forest, natural
resources, air, sunlight, rain)
REQUISITES/ESSENTIAL ELEMENTS OF
2. Must not be impossible, legally or
A CONTRACT
physically
3. Must be in existence or capable of
Art. 1318
coming into existence (future things)
There is no contract unless the following
4. Must be determinate or determinable
requisites concur:
without the need of a new contract
(1) CONSENT of the contracting parties;
between the parties (in things only)
(2) OBJECT certain which is the subject
5. All rights which are transmissible (in
matter of the contract;
rights only) (e.g., INTRANSMISSIBLE
(3) CAUSE of the obligation which is
rights: political rights such as right to
established.
vote, parental rights, marital rights)
(4) FORM – (additional in certain contracts)

NOTE:
Nos. 1-3 are COMMON requisites which are
present in all contracts. No. 4 is a SPECIAL
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(3) CAUSE/CONSIDERATION (Art. 1350)
The essential or more proximate purpose
which the contracting parties have in view
at the time of entering into the contract.
Art. 1350
In onerous contracts the cause is understood
to be, for each contracting party, the
prestation or promise of a thing or service by
the other; in remuneratory ones, the service
or benefit which is remunerated; and in
contracts of pure beneficence, the mere
liberality of the benefactor. (discussed later
in classifications)
REQUISITES OF CAUSE
1. Must exist at the time the contract
is entered into
2. Must be lawful
3. Must be true or real
(4) FORM (Art. 1356)
Refers to the manner in which a contract is
executed or manifested.
1. Oral
2. In writing
2.1. Public Instrument
2.2. Private Instrument
3. Partly oral and partly in writing
Art. 1356
Contracts shall be obligatory, in
whatever form they may have been
entered into, provided all the
essential requisites for their validity
are present. However, when the law
requires that a contract be in some
form in order that it may be valid or
enforceable, or that a contract be
proved in a certain way, that
requirement is absolute and
indispensable. In such cases, the
right of the parties stated in the
following article cannot be exercised.
REFORMATION (Art. 1359)
Remedy allowed by law by means of which
a written instrument is amended or
rectified so as to express or conform to the
real agreement or intention of the parties
when by reason of mistake, fraud,
inequitable conduct, or accident, the
instrument fails to express such agreement
or intention.
REQUISITES OF REFORMATION
1. There must be a meeting of the
minds of the parties to the contract
2. The written instrument does not
express the true agreement or intention
of the parties
3. The failure to express the true
intention is due to mistake, fraud,
inequitable conduct (i.e., any act or
omission which is unjust or unfair), or
accident
4. The facts upon which relief by way
of reformation of the instrument is
sought are put in issue by the pleadings
5. There is clear and convincing
evidence (which is more than mere
preponderance of evidence) of the
mistake, fraud, inequitable conduct, or
accident.
INTERPRETATION OF CONTRACTS (Art.
1370)
The determination of the meaning of the
terms or words used by the parties in their
written contract.
Art. 1370
If the terms of a contract are clear and leave
no doubt upon the intention of the
contracting parties, the literal meaning of its
stipulations shall control.
If the words appear to be contrary to the
evident intention of the parties, the latter
shall prevail over the former.
EXAMPLE:
Contract to deliver goods
Stipulation – We will cross the bridge when
we get there
DEFECTIVE CONTRACTS
1. Rescissible contracts (chap. 6)
2. Voidable contracts (chap. 7)
3. Unenforceable contracts (chap. 8)
4. Void or inexistent contracts (chap. 9)
(1) RESCISSIBLE CONTRACTS (Art. 1381-
1382)
Valid because all the essential requisites of
a contract exist but by reason of economic
injury or damage to one of the parties or to
third persons, such as creditors, the
contract may be rescinded.
EXAMPLE:
In fraud of creditors
Payment made in state of insolvency
(2) VOIDABLE CONTRACTS (Art. 1390)
Valid until annulled unless there has been
ratification. The defect is caused by VICE
OF CONSENT either by:
1. lack of legal capacity of ONE of the
parties
2. mistake
3. violence
4. intimidation
5. undue influence
6. fraud
EXAMPLE: In movies where a person is
tortured to sign
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(3) UNENFORCEABLE CONTRACTS (Art. the parties are reciprocally

1403) obligated to each other. (e.g.,
Cannot be sued upon or enforced unless sale, lease of thing)
they are ratified. 3.2. Remunetory or remunerative –
1. It is entered into WITHOUT or IN the cause of which is the service
EXCESS of authority, or or benefit which is
2. Does not comply with the Statute of remunerated. The purpose of
Frauds the contract is to reward the
3. BOTH lack legal capacity (compare w/ service that had been previously
voidable contracts) rendered by the party
remunerated.
EXAMPLE OF STATUTE OF FRAUDS: EXAMPLE:
1. lease for more than a year X rendered services as the
2. agreement not to be performed within a defense counsel of Y, Y in
year from making thereof return agree to pay X P10,000
for said services.
(4) VOID OR INEXISTENT CONTRACTS 3.3. Gratuitous – the cause of which
(Art. 1409) is the liberality of the benefactor
Absolutely null and void. It has no effect at or giver. (e.g., commodatum,
all and cannot be ratified. Lacks one or pure donation, guaranty)
some of the elements of a contract or is
contrary to law, morals, good customs, 4. According to FORM:
public order or public policy 4.1. Informal or common
4.2. Formal or solemn (Art. 1356)
EXAMPLE, OTHER PROVISIONS:
1. Art. 133 – Donation between spouses 5. According to OBLIGATORY FORCE:
during marriage 5.1. Valid (Art. 1306)
2. Art. 1490 – Spouses cannot sell 5.2. Rescissible (Chap. 6)
property to each other 5.3. Voidable (Chap. 7)
3. Art. 1689 – Stipulation that household 5.4. Unenforceable (Chap. 8)
service is without compensation 5.5. Void or Inexistent (Chap. 9)

CLASSIFICATIONS OF CONTRACT 6. According to PERSON OBLIGED:

1. According to NAME or DESIGNATION: 6.1. Unilateral
(Art. 1307) 6.2. Bilateral (Art. 1191)
1.1. Nominate – that which has a
specific name or designation in 7. According to LIABILITY:
law (e.g., commodatum, lease, 7.1. Unilateral – when it creates an
agency, sale) obligation on the part of only
1.2. Innominate – that which has no one of the parties (e.g.,
specific name or designation in commodatum, gratuitous
law deposit)
7.2. Bilateral – when it gives rise to
2. According to PERFECTION: (Arts. reciprocal obligations for both
1315-1316) parties (e.g., sale, lease)
2.1. Consensual – that which is
perfected by mere consent (e.g., 8. According to DEPENDENCE to another
sale, lease, agency) contract:
2.2. Real – that which is perfected 8.1. Preparatory – when it is entered
by the delivery of the thing the into as a means to an end (e.g.,
subject matter of the contract agency, partnership)
(e.g., depositum (Art. 1934), 8.2. Accessory – when is dependent
pledge(Art. 1963), upon another contract it
commodatum(Art. 2093) secures or guarantees for its
2.3. Solemn – that which requires existence and validity (e.g.,
compliance with certain mortgage, guaranty)
formalities prescribed by law, 8.3. Principal – when it does not
such prescribed form being an depend for its existence and
essential element thereof (e.g., validity upon another contract
donation of real property – in but is an indispensable
public instrument(Art. 1356) condition for the existence of an
accessory contract (e.g., sale,
3. According to CAUSE: (Art. 1350) lease)
3.1. Onerous – the cause of which,
for each contracting party is the 9. According to RISKS:
prestation or promise of a thing 9.1. Commutative – when the
or service by the other. In short, undertaking on one party is
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considered the equivalent of  Correlate to Art. 1159 which provides

that of the other (e.g., sale,
lease)
9.2. Aleatory – when it depends
upon an uncertain event or
contingency both as to benefit
or loss (e.g., insurance, sale of
hope)
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that obligations arising form contracts
have the force of law between the
contracting parties and should be
complied with in good faith.
 Correlate with Potestative obligations
(i.e., one that depends upon the will of
one of the parties)
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Article 1305 Article 1309

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.
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.

 This refers to the definition of a  Correlate with Art. 1308. Although

contract. (already discussed) compliance with a contract cannot be
___________________________________________ left to the will of one of the contracting
parties, the determination of its
Article 1306 performance may be left to a third
The contracting parties may establish person.
such stipulations, clauses, terms and
conditions as they may deem EXAMPLE:
convenient, provided they are not S sold his parcel of land to B
contrary to law, morals, good customs, It was agreed that C, a real estate
public order, or public policy. appraiser, would be the one to determine
the reasonable price of the land
 Examples ___________________________________________
 In practice, even criminal cases can be
compromised (e.g., case in La Union) Article 1311
___________________________________________ Contracts take effect only between the
parties, their assigns and heirs, except
Article 1307 in case where the rights and obligations
Innominate contracts shall be regulated arising from the contract are not
by the stipulations of the parties, by the transmissible by their nature, or by
provisions of Titles I and II of this Book, stipulation or by provision of law. The
by the rules governing the most heir is not liable beyond the value of the
analogous nominate contracts, and by property he received from the decedent.
the customs of the place.
If a contract should contain some
NOMINATE CONTRACT stipulation in favor of a third person,
That which has a specific name or he may demand its fulfillment provided
designation in law (e.g., commodatum, he communicated his acceptance to the
lease, agency, sale) obligor before its revocation. A mere
incidental benefit or interest of a
INNOMINATE CONTRACT person is not sufficient. The contracting
That which has no specific name or parties must have clearly and
designation in law. deliberately conferred a favor upon a
third person.
Governed by:
1. agreement of the parties EXAMPLE:
2. provisions of the CC on D is indebted to C in the amount of
obligations and contracts P10,000
3. rules governing the most D and C are the parties to the contract
analogous contracts If C dies, D must pay the heirs of C
4. customs of the place If C assigns his credit to X, then D is liable
___________________________________________ to pay X
If D dies and H is the heir, then H shall pay
Article 1308 C (within the value of the property he
The contract must bind both inherits from D
contracting parties, its validity or
compliance cannot be left to the will of EXCEPTIONS: INTRANSMISSIBLE
one of them. 1. by nature (e.g., involving personal
qualifications such as painting, singing)
2. by stipulation
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3. by provision of law (e.g., agency,
partnership, commodatum)
General Rule
A third person has no rights and
obligations under a contract to which he is
a stranger.
EXCEPTIONS:
1. In contracts containing a stipulation
in favor of a third person (stipulation
pour autrui)
2. In contracts creating real rights (Art.
1312)
3. In contracts entered into defraud
creditors (Art. 1313)
4. In contracts which have been
violated at the inducement of a third
person (Art. 1314)
STIPULATION POUR AUTRUI, Definition
A stipulation in a contract clearly and
deliberately conferring a favor upon a third
person who has a right to demand its
fulfillment provided he communicates his
acceptance to the obligor before its
revocation by the obligee or the original
parties.
REQUISITES OF STIPULATION POUR
AUTRUI
1. Contracting parties by their
stipulation must have clearly and
deliberately conferred a favor upon a
third person
2. The third person must have
communicated his acceptance to the
obligor before its revocation by the
obligee or the original parties
3. The stipulation in favor of the third
person should be a part, not the whole,
of the contract
4. The favourable stipulation should
not be conditioned or compensated by
any kind of obligation whatever
5. Neither of the contracting parties
bears the legal representation or
authorization of the third party for
otherwise, the rules on agency will
apply
EXAMPLE:
D owes C P10,000 payable after one year at
12% interest
It was agreed that the interest of P1,200
would be given to T whom C is indebted for
the same amount
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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.
 This is an EXCEPTION to the general
rule that a contract binds only the
parties.
REAL RIGHT
Binding against the whole world and
attaches to the property over which it is
exercised wherever it goes.
EXAMPLE:
D mortgaged his parcel of land in favor of C
as a security for his debt
The mortgage is duly registered in the
Registry of Property
Later on, D sold the same land to T
T bought the land subject to the mortgage
constituted thereon
T is bound by the contract between D and
C although he is a stranger to said contract
because the right of C to the mortgage,
being a real right, follows the property
wherever it goes
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Article 1313
Creditors are protected in cases of
contracts intended to defraud them.
 Another EXCEPTION that contracts
take effect only between the parties.
The creditor is given the right to impugn
the contracts of his debtor to defraud
him.
EXAMPLE:
D is indebted to C in the amount of
P10,000
D sells a parcel of land to T in order that C
may not attach the land in payment of his
debt
C, who is a stranger to the contract
between D and T, is given by law the right
to ask for the rescission or cancellation of
the sale in order that he may be paid his
claim
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Article 1314
Any third person who induces another
to violate his contract shall be liable for
damages to the other contracting party.
EXAMPLE:
S agreed to sell his parcel of land to B for
1M
S sells the land to C instead because of the
inducement of D
B can sue D for damages
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Article 1315
Contracts are perfected by mere
consent, and from that 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
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nature, may be in keeping with good
faith, usage and law.
Article 1316
Real contracts, such as deposit, pledge
and commodatum, are not perfected
until the delivery of the object of the
obligation.
CONSENSUAL CONTRACT
That which is perfected by mere consent
(e.g., sale, lease, agency)
REAL CONTRACT
That which is perfected by the delivery of
the thing subject matter of the contract
(e.g., depositum, pledge, commodatum)
SOLEMN CONTRACT
That which requires compliance with
certain formalities prescribed by law, such
prescribed form being thereby an essential
element thereof (e.g., donation of real
property which must be in a public
instrument)
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Art. 1317
No one may contract in the name of
another without being authorized by the
latter, or unless he has by law a right
to represent him.
A contract entered into in the name of
another by one who has no authority or
legal representation, or who has acted
beyond his powers, shall be
unenforceable, unless it is ratified,
expressly or impliedly, by the person on
whose behalf it has been executed,
before it is revoked by the other
contracting party.
 Unauthorized contracts are
unenforceable
 Unauthorized contracts can be cured
only by ratification
EXAMPLE:
D borrowed P10,000 form C in whose favor
he executed a promissory note
The note states that D is acting as the
agent of P and that the money is intended
for P
P never authorized D to borrow money from
C where the offer was made.
The contract of D is unenforceable against
P unless P ratified the same before
revocation of C
WHEN A PERSON IS BOUND BY THE
CONTRACT OF ANOTHER
REQUISITES
1. Duly authorized, expressly or
impliedly or by law must have a right to
represent him (e.g., guardian,
administrator)
2. Act within his power
General Rule
A contract entered into by an agent in
excess of his authority is unenforceable
against the principal but the agent is
personally liable to the party with whom he
contracted where such party was not given
sufficient notice of the limits of the powers
granted by the principal. (Art. 1897)
EXAMPLE:
P authorized A to sell his car for P200,000
cash
A sold the car to C for P200,000 payable in
(10) monthly instalments
P cannot be compelled by C to accept the
monthly instalments and to deliver the car
unless ratified by P
A is liable to C for damages
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CHAPTER 2
ESSENTIAL REQUISITES OF CONTRACTS
GENERAL PROVISIONS
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.
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SECTION 1. - 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 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
CONSENT
The conformity or concurrence of will (offer
and acceptance)
OFFER
A proposal made by one party to another to
enter into a contract
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 Offer must be certain or definite so that
the liability/rights of the parties may be
exactly fixed.
ACCEPTANCE
The manifestation by the offeree of his
assent to the terms of the offer.
 Acceptance of offer must be absolute or
unqualified.
 A qualified acceptance constitutes as a
counter-offer, which must, in turn, be
accepted absolutely in order that there
will be a contract.
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Article 1320
An acceptance may be express or
implied.
 Express may be oral or written.
 Implied is inferred from act or conduct.
EXAMPLE OF IMPLIED ACCEPTANCE
Where a person accepts the services of
another, whether solicited or not, he has
the obligation to pay the reasonable value
of the services thus rendered upon the
implied contract of lease of service. (Perez
vs. Pomar)
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Article 1321
The person making the offer may fix the
time, place, and manner of acceptance,
all of which must be complied with.
 Failure to comply with the foregoing
constitutes a counter-offer which has
the effect of extinguishing the original
offer. It, in effect, constitutes a new
offer which the original offerer may
accept or reject.
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Article 1322
An offer made through an agent is
accepted from the time acceptance is
communicated to him.
 An agent is considered an extension of
the personality of his principal. (Art.
1910, par. 1). Hence, the act of the
agent is, in law, the act of the principal.
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Article 1323
An offer becomes ineffective upon the
death, civil interdiction, insanity, or
insolvency of either party before
acceptance is conveyed.
 An offer may be withdrawn before it is
accepted. After acceptance, the
contract is already perfected.
 At the time the acceptance is
communicated, both parties, offerer and
offeree, must be living and capacitated.
___________________________________________
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 a consideration,
as something paid or promised.
OPTION CONTRACT
One giving a person for a consideration a
certain period within which to accept the
offer of the offerer.
It is separate and distinct from the
contract.
OPTION PERIOD
Period given within which the offeree must
accept the offer.
OPTION MONEY
Money paid or promised to be paid in
consideration for the option.
EARNEST MONEY
A partial payment of the purchase price and
is considered as proof of the perfection of
the contract.
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Article 1325
Unless it appears otherwise, business
advertisements of things for sale are
not definite offers, but mere invitations
to make an offer.
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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 the
contrary appears.
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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.
 The contract is voidable.
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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.
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LUCID INTERVAL
Temporary period of sanity.
 Drunkness and hypnotic spell impair
the capacity of a person to give
intelligent consent.
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Article 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.
OTHER SPECIAL DISQUALIFICATIONS
Under the Rules of Court, the following are
considered incompetents:
1. persons suffering the accessory penalty
of civil interdiction
2. hospitalized lepers
3. prodigals (spendthrifts); lavish or profuse
expenditure
4. deaf and dumb who are unable to read
and write
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Article 1330
A contract where consent is given
through mistake, violence, intimidation,
undue influence, or fraud is voidable.
CHARACTERISTICS OF CONSENT
1. Intelligent – there is capacity to act
2. Free and Voluntary – no vitiation of
consent by reason of violence or
intimidation
3. Conscious or spontaneous – no vitiation
of consent by reason of mistake, undue
influence or fraud
VICES OF CONSENT
1. Incapacity
2. Simulation of Contract
3. Mistake or error (Art. 1331)
4. Violence or force (Art. 1335)
5. Intimidation or threat or duress
(Ibid.)
6. Undue Influence (Art. 1337)
7. Fraud or deceit (Art. 1338)
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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.
MISTAKE
False notion of a thing or a fact material to
the contract
NATURE OF MISTAKE
1. Mistake may be of fact or law (Art. 1334)
It may arise from ignorance or lack of
knowledge
2. Substantial mistake of fact that is the
party would not have given his consent had
he known of the mistake.
Subject/Object OF MISTAKE
1. Substance of the thing which is the
object of the contract
2. Conditions which have principally moved
one or both parties to enter into the
contract
3. Identity or qualifications of one of the
parties provided the same was the principal
cause of the contract
EXAMPLE
Mistake regarding object
A is buying from B a breeding cow but B is
selling a barren cow
Mistake regarding condition of the contract
A is selling his parcel of land for P20,000
cash but B is buying the land thinking that
the price is payable in installments
Mistake regarding identity or qualifications
A sold his car to B
A thought that B, who is a lawyer, was a
doctor. (not material)
A donated his car to B
A thought that B was his half-brother.
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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.
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Article 1333
There is no mistake if the party
alleging it knew the doubt, contingency
or risk affecting the object of the
contract.
EXAMPLE
B bought a parcel of land from S who
informed him before the contract was
perfected that the land was involved in a
litigation in which C is the claimant.
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In case the land is recovered by C, B cannot
allege mistake because he knew of the risk
that the land might be recovered by C
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Article 1334
Mutual error as to the legal effect of an
agreement when the real purpose of the
parties is frustrated, may vitiate
consent.
 This refers to mistake of Law.
MISTAKE OF LAW
Arises from an ignorance of some provision
of law, or from an erroneous interpretation
of its meaning, or from an erroneous
conclusion as to the legal effect of an
agreement, on the part of one of the parties.
General Rule
Ignorance of the law excuses no one from
compliance therewith. (ignorantia legis
neminem excusat)
EXCEPTION:
When there is a mistake on doubtful
question of law, or on the construction or
application of law.
REQUISITES
1. Error must be mutual
2. As to the legal effect of an agreement
3. Frustrates the real purpose of the parties
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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.
REQUISITES OF VIOLENCE
1. physical force
2. serious or irresistible
REQUISITES OF INTIMIDATION OR
THREAT
1. Produces a reasonable and well-
grounded fear of an evil
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 into the
contract
 Intimidation is internal
 Violence is external
 The threat to a court action as a means
to enforce a just or legal claim is
justified and does not vitiate consent.
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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.
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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
Influence that overpowers the mind of a
party as to destroy his free will and make
him express the will of another, rather than
his own.
EXAMPLE
X does not want to sell the piano but he is
compelled to sell it because of his financial
condition
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Article 1338 (correlate with art. 1344) –
serious and not in pari delicto
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.
CAUSAL FRAUD
Fraud committed by one party before or at
the time of the celebration of the contract to
secure the consent of the other. (to induce
to enter into a contract)
 Distinguished from Incidental fraud
(Art. 1170)
COMMITTED BY:
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1. Insidious words or machinations
2. Concealment (Art.1339)
INSIDIOUS WORDS OR MACHINATIONS
Any misrepresentation in words or actions
done with a fraudulent purpose.
REQUISITES OF CAUSAL FRAUD
1. Misrepresentation or concealment
2. Serious
3. Employed by ONLY one of the parties (if
by a third person, does not vitiate
unless in connivance)
4. In bad faith
5. Induced the consent of the other
6. Alleged and proved by clear and
convincing evidence
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Article 1339
Failure to disclose facts, when there is
a duty to reveal them, as when the
parties are bound by confidential
relations, constitutes fraud.
 This refers to fraud by concealment.
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Article 1340
The usual exaggerations in trade, when
the other party had an opportunity to
know the facts, are not in themselves
fraudulent.
EXAMPLE
Papaya soaps, Fit and Right
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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.
EXAMPLE
 Farmer who determined the ring
 Expert on stones who
determined the ring
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Article 1342
Misrepresentation by a third person
does not vitiate consent, unless such
misrepresentation has created
substantial mistake and the same is
mutual.
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Article 1343
Misrepresentation made in good faith is
not fraudulent but may constitute error.
 This refers to instances wherein the
person making false statement believed
it to be true.
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Article 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.
 Incidental fraud here must not be
confused with incidental fraud in Arts.
1170-1171
 The fraud was not the principal
inducement that led the other to give
consent, hence liable only for damages
REQUISITES OF CAUSAL FRAUD
1. serious
2. should not have been employed by both
contracting parties (not in pari delicto)
[He who comes to court must come with
clean hands]
3. should not have been known by the other
contracting party
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Article 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.
Article 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.
SIMULATION OF A CONTRACT
Act of deliberately deceiving others, by
feigning or pretending by agreement, the
appearance of a contract which is either
non-existent or concealed.
KINDS
1. ABSOLUTE
When the contract does not really exist and
the parties do not intend to be bound at all.
2. RELATIVE
When the contract entered into by the
parties is different from their true
agreement.
EXAMPLE
D and C entered into a contract of
mortgage. But wanting to hide the
mortgage, it was made to appear in the
form of a deed of sale.
Contract of Sale – ostensible/apparent
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Contract of Mortgage – concealed

As far as D and C are concerned, the

contract entered into between them is a
contract of mortgage. As to third persons,
the apparent contract is the contract of
sale. Consequently, if C sells the land to B,
B will acquire ownership. D and C are
estopped or barred from claiming that the
real agreement entered into by them is a
contract of mortgage.