Professional Documents
Culture Documents
When creditors receive partial payment, they are not NOTE: Payment made by a third person who does
ipso facto deemed to have abandoned their prior not intend to be reimbursed by the debtor is deemed
demand for full payment. to be a donation, which requires the debtor's
consent. But the payment is in any case valid as to the
NOTE: While Art. 1248 of the Civil Code states that creditor who has accepted it (NCC, Art. 1238).
creditors cannot be compelled to accept partial
payments, it does not prohibit them from accepting Person to whom payment is made
such payments (Selegna Management and - Persons entitled to receive the payment:
Development Corp. v. UCPB, G.R. No. 165662, May
30,2006). 1. The person in whose favor the obligation has
been constituted;
Person who pays 2. His successor in interest; or
- The following persons may affect payment and 3. Any person authorized to receive it (NCC, Art.
compel the creditor to accept the payment: 1240).
NOTE: The rules on payment by a third person (NCC, 2) Payment to a third person insofar as it
Article. 1236 to 1238) cannot be applied to the case redounded to the benefit of the creditor; and
of a third person who pays the redemption price in Benefit to the creditor need not be proved:
sales with right of repurchase. This is so because the
vendor a retro is not a debtor within the meaning of a. If after the payment, the third person acquires
the law (Jurado, 2010). the creditor’s Rights;
b. If the creditor Ratifies the payment to the
Rights of a third person who made the payment third person; or
c. If by the creditor’s conduct, the debtor has
1. If the payment was made with knowledge and been led to believe that the third person had
consent of the debtor: authority to receive the payment (Estoppel)
a. Can recover entire amount paid (absolute (NCC, Art. 1241).
reimbursement); or
b. Can be subrogated to all rights of the creditor 3) Payment in good faith to the possessor of credit
(NCC, Art. 1242).
2. If the payment was made without knowledge or NOTE: Payment made to the creditor by the debtor
against the will of the debtor – Can recover only after the latter has been judicially ordered to retain
insofar as payment has been beneficial to the the debt shall not be valid. (NCC, Art. 1243).
debtor (right of conditional reimbursement).
3
obligation to the extent NOTE: Once the consignation has been duly made, the
of the value of the thing for net proceeds of debtor may ask the judge to order the cancellation of
delivered as agreed things ceded or the obligation (NCC, Art. 1260).
upon, proved or implied assigned, unless there is NOTE: Consignation is necessarily judicial. Art. 1258 of
from the conduct of the contrary intention. the CC specifically provides that consignation shall be
creditor. made by depositing the thing or things due at the
Ownership disposal of judicial authority. The said provision clearly
Ownership is
Ownership is not precludes consignation in venues other than the
transferred to CR upon
transferred. courts (Spouses Oscar and Thelma Cacayorin v. Armed
delivery.
Forces and Police Mutual Benefit Association, Inc.,
Novation
G.R. No. 171298, April 15, 2013).
An act of novation. Not an act of novation
Presumption of insolvency
Does not presuppose Effectively of consignation as payment
Presupposes insolvency.
insolvency.
GR: Consignation shall produce effects of payment
C. Tender of payment only if there is a valid tender of payment
- The definitive act of offering to the creditor what
is due him together with the demand that the XPNs: It shall, however, not produce the same effect
creditor accept the same (FEBTC v. Diaz Realty in the following cases.
Inc., G.R. No. 138588, August 23, 2001).
When:
- Tender of payment is the manifestation by 1. Creditor is Absent or unknown, or doesn’t
debtors of their desire to comply with or to pay appear at place of payment;
their obligation (Sps. Benos v. Sps. Lawilao, G.R. 2. Creditor Refuses to issue a receipt without
No. 172259, December 5, 2006). just cause;
3. Title of the obligation has been lost;
NOTE: If the creditor refuses the tender of payment 4. Creditor is Incapacitated to receive payment
without just cause, the debtors are discharged from at the time it is due; or
the obligation by the consignation of the sum due 5. Two or more persons claim the right to collect
(Sps. Benos v. Sps. Lawilao, G.R. No. 172259, (NCC, Art. 1256).
December 5, 2006).
NOTE: The expenses of consignation, when properly
There must be a fusion of intent, ability and capability made, shall be charged against the creditor (NCC, Art.
to make good such offer, which must be absolute and 1259).
must cover the amount due (FEBTC v. Diaz
RealtyInc.,G.R. No. 138588, August 23, 2001). Right of the debtor to withdraw the thing
deposited
Tender of payment is a preparatory act which - Before the creditor has accepted the
precedes consignation. The tender of payment by consignation, or before a judicial declaration that
itself does not cause the extinguishment of the the consignation has been properly made, the
obligation unless completed by consignation. debtor may withdraw the thing or the sum
(Tolentino, 1991). deposited, allowing the obligation to remain in
force (NCC, Art.1260).
D. Consignation
- Act of depositing the object of the obligation NOTE: If, the consignation having been made, the
with the court or competent authority after the creditor should authorize the debtor to withdraw the
creditor has unjustifiably refused to accept the same, he shall lose every preference which he may
same or is not in a position to accept it due to have over the thing. The co- debtors, guarantors and
certain reasons or circumstances (Pineda, 2000). sureties shall be released (NCC, Art. 1261).
GR: The obligation is extinguished when the object of Effect of Partial Loss
the obligation is lost or destroyed (NCC, Art. 1262).
6
1. Due to the fault or negligence of the debtor – applied absolutely in contractual relations since
Creditor has the right to demand the parties are presumed to have assumed the risk of
rescission of the obligation or to demand unfavorable developments (Pineda, 2000). This rule
specific performance, plus, damages, in also does not apply to obligations for the payment of
either case. a sum money when there is a change in the value of
2. Due to fortuitous event: the stipulated currency. In such case, Art. 1250 will
a. Substantial Loss – Obligation is apply (Tolentino, 2002).
extinguished
b. Unsubstantial Loss – The debtor shall
deliver the thing promised in it impaired CONDONATION OR REMISSION OF DEBT
condition (NCC, Art. 1264).
- An act of liberality by virtue of which the creditor,
Effect when the thing is lost in the possession of without receiving any price or equivalent,
the debtor renounces the enforcement of the obligation, as
a result of which it is extinguished in its entirety or
GR: It is presumed that loss is due to debtor’s fault. in that part or aspect of the same to which the
The obligation is not extinguished. condonation or remission refers (Pineda, 2000).
XPN: Presumption shall not apply in case loss is due to
earthquake, flood, storm, or other natural calamity Requisites of condonation
(NCC, Art. 1262). 1. Must be Gratuitous;
2. Acceptance by the debtor;
3. Must not be Inofficious;
XPN to the XPN: Debtor still liable even if loss is due 4. Formalities provided by law on Donations
to fortuitous event when; must be complied with if condonation is
1. Debtor incurred in delay; or express; and
2. Debtor promised to deliver the thing to two or 5. An Existing demandable debt at the time the
more persons with different interest (NCC, remission is made.
Art. 1165(3)).
NOTE: Remission or condonation of a debt is in reality
Effect of unforeseen difficulty of fulfillment a donation (Jurado, 2010).
- When the service has become, so difficult as to be
manifestly beyond the contemplation of the
parties, the obligor may also be released there Manner and kinds of remission:
from, in whole or in part (NCC, Art. 1267). The 1. Total – Refers to the remission of the whole
impossibility of performance of an obligation to of the obligation;
do shall release the obligor. 2. Partial – Remission of the part of the
obligation: to the amount of indebtedness or
to an accessory obligation only (such as
pledge or interest) or to some other aspect of
Rebus sic stantibus the obligation (such as solidary);
- A principle in international law which mean than 3. Inter vivos – Effective during the lifetime of
an agreement is valid only if the same conditions the creditor;
prevailing at the time of contracting continues to 4. Mortis causa – Effective upon death of the
exist at the time of performance. It is the basis of creditor. In this case, remission must be
the principle of unforeseen difficulty of service contained in a will or testament (Tolentino,
(NCC, Art. 1267). 1991)
5. Express – When it is made formally, it should
NOTE: Principle of unforeseen events applies when be in accordance with the forms of ordinary
the service has become so difficult as to be manifestly donations with regard to acceptance, amount
beyond the contemplation of the parties, the obligor and revocation; and
may also be released there from in whole or in part 6. Implied – When it can be inferred from the
(NCC, Art. 1267). However, his principle cannot be acts of the parties.
7
- The creditor and debtor becomes the same NOTE: During such interregnum, the running of the
person involving the same obligation. Hence, the period of prescription of the obligation is suspended.
obligation is extinguished (NCC, Art. 1275). (Pineda, 2000)
- There can be partial confusion
- It will be definite and complete up to the extent of COMPENSATION
the concurrent amount or value, but the
remaining obligation subsists (Pineda, 2000). - It is a mode of extinguishing obligations that take
place when two persons, in their own right, are
Effect of confusion or merger in relation to the creditors and debtors of each other (NCC, Art.
guarantors 1278).
1. Merger which takes place in the person of the - It is the offsetting of the respective obligation of
principal debtor or principal creditor benefits two persons who stand as principal creditors and
the guarantors. The contract of guaranty is debtors of each other, with the effect of
extinguished; extinguishing their obligations to their concurrent
2. Confusion which takes place in the person of amount.
any of the guarantors does not extinguish the
obligation (NCC, Art. 1276). Requisites of compensation
- In order that compensation may be proper, it is
Effect of confusion or merger in one debtor or necessary that (NCC, Art. 1279):
creditor in a joint obligation 1. Each one of the obligors must be bound
principally, and that he be at the same time a
GR: principal creditor of the other except
Joint obligation is not extinguished since guarantor who may set up compensation as
confusion is not definite and complete with regards what the creditor may owe the
regard to the entire obligation. A part of the principal (NCC, Articles. 1279-1280);
obligation still remains outstanding. 2. Both debts consist in sum of money, or if the
things due are consumable, they be of the
XPN: same kind and also of the same quality if the
Obligation is extinguished with respect only to latter has been stated;
the share corresponding to the debtor or 3. Both debts are due;
creditor concerned. In effect, there is only 4. Both debts are liquidated and demandable;
partial extinguishment of the entire 5. Neither debt must be retained in a
obligation (NCC, Art. 1277; Pineda, 2000). controversy commenced by third person and
communicated in due time to the debtor
Effect of confusion or merger in one debtor or (neither debt is garnished) (NCC, Art. 1279);
creditor in a solidary obligation and
- If a solidary debtor had paid the entire obligation, 6. Compensation must not be prohibited by law.
the obligation is totally extinguished without (NCC, Art. 1290).
prejudice to the rights of the solidary debtor who
paid, to proceed against his solidary co-debtors Effects of compensation:
for the latter’s individual contribution or liability 1. Both debts are extinguished;
(NCC, Art. 1215). 2. Interests stop accruing on the extinguished
obligation or the part extinguished;
Revocation of confusion or merger of rights 3. The period of prescription stops with respect
- If the act which created the confusion is revoked to the obligation or part extinguished; and
for some causes such as rescission of contracts, or 4. All accessory obligations of the principal
nullity of the will or contract, the confusion or obligation which has been extinguished are
merger is also revoked. The subject obligation is also extinguished (4 Salvat 353).
revived in the same condition as it was before the
confusion. Debts or obligations not subject to compensation
9
- Hence, there can be no contract if there is no 3. Consummation or fulfillment - This is the last
obligation. But an obligation may exist without a stage which consists in their performance or
contract (De Leon, 2010). fulfillment by the parties of their obligations
under the term of the perfected contract.
Elements of a contract
a. Essential elements – (without them a contract Characteristics of a Contract
cannot exist) The following are the characteristics of a contract:
e.g. consent, subject matter, cause or 1. Autonomy (article 1306, New Civil Code)
consideration - The contracting parties may establish such
note: in some contracts, form is also essential; still stipulations, clauses, terms and conditions as they
in others, delivery is likewise essential.) may deem convenient, provided they are not
contrary to law, morals, good customs, public
b. Natural elements – (those found in certain order, or public policy.
contracts, and presumed to exist, unless the
contrary has been stipulated) 2. Mutuality (article 1308 NCC)
e.g. warranty against eviction and against hidden - The contract must bind both contracting parties;
defects in the contract of sale its validity or compliance cannot be left to the will
of one of them.
c. Accidental elements - (these are the various
particular stipulations that may be agreed 3. Obligations and consensuality (Article 1315 NCC)
upon by the contracting parties in the - Contracts are perfected by mere consent, and
contract. They are called accidental, because from that moment the parties are bound not only
they may be present or absent depending to the fulfillment of what has been expressly
upon whether or not the parties have agreed stipulated but also to all the consequences which,
upon them) according to their nature, may be in keeping with
e.g. the stipulation to pay credit; the stipulation to good faith, usage and law.
pay interest; the designation of the particular
place for delivery or payment. 4. Relativity (Article 1311 NCC)
- Contracts take effect only between the parties,
Duty of courts in interpreting contracts their assigns and heirs, except in case where the
- It is not the province of the court to alter a rights and obligations arising from the contract
contract by construction or to make a new are not transmissible by their nature, or by
contract for the parties. Its duty is confined to the stipulation or by provision of law. The heir is not
interpretation of the one which they have made liable beyond the value of the property he
for themselves without regard to its wisdom or received from the decedent.
folly as the court supply material stipulations or
red into the contract words which it does not 5. Consensuality (Article 1315, NCC)
contain (Cuizon v. CA, G.R No. 102096, August 12, - Contracts are perfected by mere consent, and
19996). from that moment the parties are bound not only
to the fulfillment of what has been expressly
Stages in the making of a contract stipulated but also to all the consequences which,
Three stages in the making of a contract: according to their nature, may be in keeping with
good faith, usage and law.
1. Conception or Generation – the first stage
where the parties begin their initial Relativity of contracts
negotiation and bargaining for the formation Principle of relativity or Principle of limited
of the contract ending at the moment of effectivity of contracts
agreement of the parties.
2. Perfection or Birth – Here, the parties had a GR: Contract take effect only between the parties or
meeting of minds as to the object, cause or their assigns and heirs.
consideration and other terms and conditions Res inter alios acta aliisnequenocitprodest (a thing
of the contract. done between others does not harm or benefit
14
others) – a contract can only obligate the parties who 3. Third persons coming into possession of the
entered into it, or their successors who assumed their object of the contract creating real rights subject
personalities, and that, concomitantly, a contract can to the provisions of Mortgage Law and the Land
neither favor nor prejudice third persons (Vitug, Registration Law (NCC, ART. 1312);
2006).
NOTE: With respect to the heir, he shall not be liable 4. Contracts entered into in fraud of creditors; (NCC,
beyond the value of the property he received from ART. 1313);
the decedent (NCC, Art. 1311).
5. When a third person induces a party to violate the
XPNs: contract (NCC, ART. 1314).
1. Rights and obligations that are not transmissible NOTE: This tort or wrongful conduct is known as
by their nature, or by the stipulation or by “interference with contractual relations.”
provisions of law (NCC, ART. 1311);
NOTE: Determine whether a contract terminates upon Requisites:
the death of one of the parties a. Existence of a valid contract
b. Third person has knowledge of such contract;
2. Stipulation pour autrui (stipulation in favor of a c. Third person interfaces without legal
third person) – benefits clearly and deliberately justification or excuse (De Leon, 2010).
conferred by parties to a contract upon third
persons (NCC, ART. 1311) and which stipulation is Thus, third person and the breaching party is liable
merely part of a contract entered into by the for damages. It is based on quasi-delict and their
parties, neither of whom acted as agents of the liability is solidary.
third person and which favor can be demanded by NOTE: A third person can be held liable for tort inter
the third person if duly accepted by him before it reference even if he does not know the identity of one
could be revoked; of the contracting parties. The interference with
Requisites of stipulation pour atruit: lawful contracts by strangers there to gives rise to an
a. Stipulation in favor of a third person action for damage in favor of the injured person. The
b. Stipulation in just part and not the whole law does not require that the responsible person shall
obligations of the contract; have known the identity of the injured person
c. Contracting parties must have clearly and (Rabuya, 2017).
deliberately conferred a favor upon third
person;
d. Favor or benefit conferred is not just an Obligatory force of contracts
incidental benefit or interest; - Contracts shall be obligatory, in whatever form
e. Third person must have communicated his the may have been entered into, provided all the
acceptance; and essential requisites for validity are present (NCC,
f. Neither of the contracting parties bears the ART. 1356).
legal representation of the third person - Obligations arising from contracts have the force
(Young v. Court Appeals, G.R. No 79518, of law between the contracting parties and should
January 13, 1989). be complied with in good faith. (NCC, ART. 1159)
- This provision must fall within the other
NOTE: The fairest to test to determine whether characteristic of a contract
the interest of third person in a contract is a
stipulation pour atrui or merely an incidental NOTE: Obligations arising from contracts have the
interest, is to rely upon the intention of the force of law between the contracting parties and
parties as disclosed by their contract. In applying should be complied with in good faith (NCC, ART.
this test, it matters not whether the stipulation is 1159).
in the nature of a gift or whether there is an
obligation owing from the promise to the third Requisites for the application of the principle
person (Rabuya, 2017). Before a contract may be considered obligatory, it is
necessary that:
15
1. It is perfected;
2. It is valid; and Validity of contract of adhesion
3. It is enforceable (Rabuya, 2017). - It is entirely prohibited since the one who adheres
to the contract is, in reality, free to reject entirely,
Mutuality of contracts and if he adheres, he gives consent. However, it is
- The contract must bind both contracting parties void when the weaker party is imposed upon
and its validity or compliance cannot be left to the dealing with the dominant bargaining party, and
will of one of them (NCC, ART. 1308). its option is reduced to the alternative of “taking
or leaving it,” completely depriving such party of
- If a party alleges defects in the contract so that it the opportunity to bargain on equal footing.
could be set aside, he must prove conclusively the NOTE: Such contracts are not void in themselves. They
existence of the defects because the validity and are as binding as ordinary contracts. Parties who enter
fulfillment of the contract cannot be left to the into such contracts are free to reject stipulations
will of one of the contracting parties. (Pineda, entirely.
2009)
- The binding effect of any agreement between Interpretation of contract adhesion
parties to a contract is premised on two settled - In interpreting such contracts, however, courts
principles: are expected to observe greater vigilance in order
1) That any obligation arising from contract has to shield the unwary or weaker party from
the force of law between the parties; and deceptive schemes contained in ready-made
2) That there must be mutuality between the covenants. In case of doubt, which will cause a
parties based on their essential equality. great imbalance of rights against one of the
- Any contract which appears to be heavily parties, the contract shall be construed against
weighted in favor of one of the parties so as to the party who drafted the same.
lead an unconscionable result is void. Any
stipulation regarding the validity or compliance of Third person may determine the performance of
the contract which is left solely to the will of one a contract
of the parties, is likewise, invalid. (Sps. Jucio vs. - The determination of the performance may be left
China Banking Corp., G.R. 187678, April 10, 2013) to a third person. However, his decision shall not
be binding until it has been known to both the
NOTE: A contract containing a condition whose contracting parties (NCC, ART. 1309). Moreover,
efficiency or fulfillment is dependent solely on the the determination made shall not be obligatory if
uncontrolled will of one of the parties is void. it is evidently inequitable. In such case, the courts
shall decide what is equitable under the
However, the termination of the contract does not circumstance (NCC, ART. 1310).
necessarily require mutuality, and it can even be
validly left to one party by agreement or under a Unilateral increase of interest rate
resolutory facultative condition. - Even assuming that the loan agreement between
the creditor and the debtor gave the former a
Contract of Adhesion license to increase the interest rate at will during
- It is a contract in which one of the parties the term of the loan, the license would have been
prepares the stipulations in the form of a ready- null and void for being violative of the principle of
made contract, which the other party must accept mutuality essential in contracts (Rabuya, 2017).
or reject, but not modify, by affixing his signature
or his “adhesion” thereto; leaving no room for Autonomy of contract/ Liberty of contracts
negotiation and depriving the latter of the - It is the freedom of the parties to contract and to
opportunity to bargain on equal footing. stipulate provided the stipulations are not
contrary to law, morals, good customs, public
order or public policy (NCC, ART. 1306).
XPNs:
1. Contracts containing a stipulation in favor of a CONSENT, OBJECT and CAUSE
third person (pour autrui) [NCC, ART. 1311
(2)]; ESSENTIAL REQUISITES OF A CONTRACT
2. Contracts containing real rights (NCC, ART. The following are the essential requisites of contracts
1312); (COC):
3. Contracts entered into to defraud creditors 1. Consent of the contracting parties;
m(NCC, ART. 1313); 2. Object or subject matter; and
4. Contracts which have been violated at the 3. Cause or consideration (NCC, Art 1318, Cathay
inducement of 3rd persons (NCC, ART. 1314); Pacific v. Vasquez,
5. Quasi-contract of negotiorum gestio (NCC, NOTE: These three requisites are, therefore, the
ART. 2150). essential elements of a contracts, however, in
addition to the above, the delivery of the object of the
Liability of heirs for the obligation contracted by contract is required as a further requisite.
the decedent
- The heirs are liable for the obligation contracted CONSENT
by the decedent when the rights and obligations - It is the concurrence of the wills of the contracting
arising from the contract are transmissible: parties with respect to the object and cause,
1. By their nature;
17
which shall constitute the contract (De Leon, binds the offer or from the time such acceptance is
2010). known to him. In such case, it is presumed that the
contract has been entered into in the place where the
NOTE: Consent is essential to the existence of a offer was made. (NCC, ARTICLE 1319).
contract; and where it is wanting, the contract is non-
existent. NOTE: We follow the cognitive theory and NOT the
mailbox theory. Under our Civil Law, the offer and
CONSENT acceptance concur only when the acceptance has
‘Consent’ Defined reached the knowledge of the offer or (actual
a. It is the meeting of the minds between the knowledge), and not at the time of sending the
parties on the subject matter and the cause of acceptance.
the contract, even if neither one has been
delivered. Requisites for the Meeting of the Minds
b. It is the manifestation of the meeting of the a. An offer must be CERTAIN
offer and the acceptance upon the thing and b. And an acceptance must be UNQUALIFIED and
the cause which are to constitute of the ABSOLUTE
contract. (ARTICLE 1319, 1ST PART).
EXAMPLE: Persons incapacitated to give consent
A offered to sell B a particular car for 200,000 1. Unemancipated minors
PESOS. Before B could consent, A withdrew - Emancipation only takes place upon
the offer. Was A allowed to do so? attainment of the age of majority, that is,
Ans: Yes, because there was no meeting of reaching the age of eighteen (18) as provided
the minds yet, hence no contract has been under Article 234 of the Family Code of the
perfected yet. Philippine.
2. Insane or demented persons (unless they
Requisites of Consent: acted during the lucid interval), drunks, and
a. There must be two or more parties [NOTE: those hypnotized. (ART. 1328, Civil Code).
one person may represent two or more 3. Deaf – mutes who do not know how to read
parties, unless there are contradictory or and write (if they know how to read but
prejudicial interests involved. (see. Article don’t know how to write, it is submitted that
1490, Civil Code; Garchitorena v Sotelo, 74 the contract is valid, for then they are capable
Phil. 25)] of understanding, and therefore capacitated
b. The parties must be capable or capacitated to give consent).
(hence, if one party be insane, the contract is
merely voidable) Rules on advertisements as offers
c. there must be no vitiation of consent. 1. Business advertisements – Not a definite
(Example: there must be no fraud or offer, but mere invitation to make an offer,
intimidation, otherwise the contract is unless it appears otherwise (NCC, ART. 1325).
voidable) 2. Advertisement for bidders – Simply invitation
d. there must be no conflict between what was to make proposals and advertiser is not bound
expressly declared and what was really to accept the highest or lowest bidder, unless
intended. Otherwise, the remedy may be the contrary appears (NCC, ART. 1326).
reformation, as when the parties really
intended to be bound, or else the contract is Mirror Image Rule in law on contracts
VOID as when the contract is fictitious or - This is a common law concept which states that in
absolutely simulated. order for there to be an acceptance, the offeree
e. The intent must be declared properly (that is must accept the terms as stated in the offer. Our
whatever legal formalities are required must courts also adhere to the “mirror-image rule”.
be complied with). Thus, it has been ruled that acceptance must be
identical in all respects with that of the offer so as
NOTE: A qualified acceptance constitutes a counter- to produce consent of meeting of the minds.
offer. Acceptance made by letter or telegram only
18
Persons incapacitated to give consent GR: Mistake as a vice of consent refers to voidable
1. Deaf-mutes who do not know how to read (Jurado, 2010).
and write (illiterates);
2. Insane or demented persons, unless the XPN: When mistake of law involves mutual error as to
contract was entered into during a lucid the legal effect of an agreement when the real
interval; purpose of the parties is frustrate (NCC, Art. 1334).
3. Minors (NCC, ART. 1327) except:
a. Contracts for necessaries (NCC, Art. 1489) Requisites:
b. Contracts by guardians or legal representatives 1. Mistake must be with respect to the effect of
and the court having jurisdiction had approved the agreement
the same; 2. It must be mutual; and
c. When there is active misrepresentation on the 3. Real purpose of the parties must have been
part of the minor (minor is frustrated.
NOTE: It is now well settled that Kinds of mistakes of fact which vitiate consent
misrepresentation by un emancipated minors 1. Error in re (mistake as to object)[NCC, Art. 1313
with regard to their age when entering into a (1)];
contract shall bind them in the sense that they are a. Error in corpore (mistake as to the identity of
estopped subsequently from impugning the the thing);
validity of the contract on the ground of minority. b. Error in substantia (mistake as to the
It is, however, necessary that the substance of the thing);
misrepresentation must be active, not merely c. Error in quantitae (mistake as to the quantity
constructive. of the thing)
Mistake as to the conditions of the thing, provided
d. Contracts of deposit with the Postal Savings Bank such conditions have principally moved one or
provided that the minor is over seven years of age; or both parties to enter into the contract.
e. Upon reaching age of majority – they ratify the 2. Error in Persona (mistake as to person)
same - Mistake as to the identity or qualifications of one
of the parties will vitiate consent only when such
NOTE: Because the law incapacitates them to give identity or qualifications have been the principal
their consent to a contract, the only way by which cause of the contract. For mistake (as to the
any one of those enumerated above can enter qualification of one of the parties) to vitiate
into a contract is to act through a parent or consent, two requisites must concur:
guardian. If this requirement is not complied with,
the result is adefective contract. If only one of the a. The mistake must be either with regard to the
contracting parties is incapacitated to give his identity or with regard to the qualification of
consent, the contract is voidable. If both of them one of the contracting parties; and
are incapacitated to give their consent, the b. The identity or qualification must have been
contract is unenforceable. the principal consideration for the celebration
of the contract.
Vices of consent
1. Mistake; Intimidation
2. Intimidation Violence; - There is intimidation when one of the contracting
3. Undue influence; parties is compelled by a reasonable and well-
4. Fraud. grounded fear of an imminent and grave evil upon
NOTE: A threat to enforce a just or legal claim through his person or property, or upon the person or
a competent authority does not amountto property of his spouse, descendants or
intimidation nor vitiate consent (NCC, ART. 1335). ascendants, to give his consent (NCC, ART. 1335
(2))
Mistake
Requisites of intimidation (CICU)
19
1. One of the parties is compelled to give his NOTE: The enumeration is NOT exclusive. Moral
Consent by a reasonable and well-grounded dependence, indigence, mental weakness, tender age
fear of an evil; or other handicap are some of the circumstances to
2. The evil must be Imminent and consider undue influence.
3. It must be Unjust; and
4. The evil must be the determining Cause for Determination of undue influence
the party upon whom it is employed The test to determine whether or not there is undue
inentering into the contract (NCC, Art. 1335). influence which will invalidate a contract is to
determine whether or not the influence exerted has
NOTE: To determine the degree of the so overpowered and subjugated the mind of the
intimidation, the age, sex and condition of the contracting party as to destroy his free agency,
person shall be borne in mind (NCC, Art. 1335). making him express the will of another rather than his
own (Jurado, 2011).
Validity of a contract if consent is reluctant
- A contract is valid even though one of the parties Fraud
entered into it against his wishes and desires or - There is fraud when through the insidious words
even against his better judgment. Contracts are or machinations of one of the contracting parties
also valid even though they are entered into by the other is induce to enter into a contract which,
one of the parties without hope of advantage or without them, he would not have agreed to (NCC,
profit. ART. 1338).
e. Should not have been employed by Articles. 1345 – 1346). In absolute simulation,
both contracting parties or by third there is color able contract but it has no
persons; and substance as the parties have no intention to
f. The victim suffered damage or injury. be bound by it. The main characteristic of an
absolute simulation is that the apparent
BASIS DOLO DOLO contract is not really desired or intended to
CAUSANTE INCIDENTE produce legal effect or in any way alter the
(ART. 1338) (ART. 1344) juridical situation of the parties. As aresult, an
Gravity of Serious in Not serious absolutely simulated or fictitious contract is
Fraud character void, and the parties may recover from each
Efficient Cause Efficient cause Not the other what they may have given under the
which induces efficient cause contract.
the party to
enter into a
2. Relative (Disimulados)- The contracting
contract
parties conceal, their true agreement (NCC,
Effect on the Renders the Does not affect
Status of the contract validity of the ART. 1345); binds the parties to their real
Contract voidable contract agreement when it does not prejudice third
Remedies Annulment Contract persons or is not intended for any purpose
with damages remains valid. contrary to law, morals, good customs, public
Remedy is order or public policy(NCC, Art. 1346). If the
claim for concealed contract is lawful, it isabsolutely
damages. enforceable, provided it hasall the essential
requisites: consent, object, and cause (NCC,
ART. 1345-1346).
Acts considered not fraudulent
1. The usual exaggerations in trade and the As to third persons without notice, the apparent
other party had an opportunity to know the contract is valid for purposes beneficial to third
facts are not themselves fraudulent (NCC, Art. persons with notice of the simulation, they acquire no
1340). better right to the simulated contract than the original
2. A mere expression of an opinion does not parties to the same.
signify fraud, unless made by an expert and
the other party had relied on the former’s The primary consideration in determining the true
special knowledge (NCC, ART. 1341); nature of a contract is the intention of the parties.
3. Misrepresentation by a third person does not Such intention is determined from the express terms
vitiate consent, unless such misrepresentation of their agreement as well as from their
has created substantial mistake and the same contemporaneous and subsequent acts.
is mutual (NCC, ART. 1342); and
4. Misrepresentation made in good faith is not NOTE: If the parties state a false cause in the contract
fraudulent but may constitute error (NCC, to conceal their real agreement, the contract is only
ART. 1343). relatively simulated and the parties are still bound by
the real agreement. Hence, where the essential
Simulation of contract requisites of a contract are present and the simulation
- It is the declaration of a fictitious will, deliberately refers only to the content or terms of the contract,
made by agreement of the parties, in order to the agreement is absolutely binding and enforceable
produce, for the purposes of deception, the between the parties and their successors.
appearance of a juridical act which does not exist in interest.
or is different from that which was executed.
NOTE: Every contract is presumed to have a cause and e.g.Contracts entered by guardian when
such cause is LAWFUL. ward suffers lesion of more than 25% and
with courtapproval, otherwise, if there is
Kinds of cause no approval, the contract is void
1. Cause of onerous contracts – The prestation regardless of the amount of lesion.
or promise of a thing or service by the other
e.g. Contract of Sale