Module 7 - Week 14 - Contract - Essential Requisites

Week 14
ESSENTIAL REQUISITES OF
CONTRACTS
SECTION 1. - Consent
ESSENTIAL REQUISITES OF
CONTRACTS
Art. 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.
Atty. J_Ong_Oct 2020

Elements of a Contract
• Essential elements
• Common (Consent, Object, Cause)
• Special (Form /subject matter/consideration)
• Form – formalities in solemn contract, deliver in real contract, registration to bind third person
(Real estate mortgage, chattel mortgage)
• Solemn contract (Consent, Object, Cause + Execution of formalities)
• Stipulation of interest = writing. (Art. 1956)
• Contribution of immovable property in partnership = inventory of such property +
public instrument. (Art. 1771 & 1773)
• Donation of personal property where the value exceed P5,000 = in writing (Art. 748)
• Donation as well as acceptance of real property = Public instrument. (Art. 749)
• Will = writing + formalities prescribed by law. (Art 804)
• Agent authority in case of sale of immovable property in behalf of the principal =
writing (Art. 1874)
• Real Contract (Consent, Object, Cause + Delivery)
• Deposit
• Pledge
• Commodatum

Special elements
Subject Matter
Real estate mortgage Real property No delivery

Chattel mortgage Personal property No delivery
Pledge Personal property Delivery
Antichresis Real property Delivery
Consideration or cause – Sale (price); Commodatum

(liberality)

Elements of Contract
• Natural elements – presumed to exist in certain
contracts
• Warranty against eviction
• Warranty against hidden defect
• Accidental elements (by stipulation) – Exist only when
they are expressly provide by the parties. (i.e.
Conditions, period, interest, penalty, place of
payment)

Consent
Art. 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.
Face to face
P500,000
A Object B
P500,000

Consent
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. (Art 1319 par 2)
Letter or telegram
6/15/2020 6/18/2020
A Object B
P500,000
6/19/2020
6/21/2020
Theory of manifestation
Theory of cognition

Consent
Art. 1320. An acceptance may be express or implied.
Art. 1321. The person making the offer may fix the time, place, and
manner of acceptance, all of which must be complied with.
Art. 1323. An offer becomes ineffective upon the death, civil
interdiction, insanity, or insolvency of either party before acceptance is
conveyed.
• Death
• Insanity
• Civil Interdiction
• Insolvency
6/15/2020 6/18/2020
A Object B
P500,000
6/19/2020
6/21/2020
Theory of cognition/manifestation
• Theory of cognition – The acceptance is
considered to effectively bind the offeror
only from the time it came to his
knowledge. (Civil code)
• Theory of manifestation – The contract is
perfected at the moment when the
acceptance is declared or made by the
offeree. (Code of commerce)

Consent
Art. 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 Money P10.000

Object
A B
P500,000
30 days

Letter of acceptance is withdrawn
A offered on Jan1. B accepted on Jan 8. The letter of acceptance
was received by A on Jan 15. But on Jan 12, B had already
written a letter revoking the acceptance. Was there a meeting of
the minds?
Letter of offer
Jan 1
Object
A B
Letter of acceptance P500,000 Jan 8
Received Jan 15 Made a letter
Scenario 2 Scenario 1 of acceptance
Letter of revocation Letter of revocation
Jan 16 Jan 14
No meeting of the mind
If the letter of revocation of acceptance is received before Jan 15?

Answer: No meeting of the mind
If the letter of revocation of acceptance is received after Jan 15?
Answer: Yes (Reyes and Puno)
No (Tolentino and Manresa)
Not Definite Offer
Art. 1325. Unless it appears otherwise, business
advertisements of things for sale are not definite
offers, but mere invitations to make an offer. (n)
Art. 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.

Continuation
Contracts
Incapacity
Art. 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.

Vices of Consent
A contract where consent is given through (Art. 1330)
1. Mistake
2. Violence
3. Intimidation
4. Undue influence, or
5. Fraud

Mistake
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.(1331)

Mistake
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. (1332)
There is no mistake if the party alleging it knew the
doubt, contingency or risk affecting the object of the
contract. (1333)
Mutual error as to the legal effect of an agreement
when the real purpose of the parties is frustrated, may
vitiate consent. (1334)

Violence
Definition:
There is violence when in order to wrest consent, serious or irresistible force
is employed. (Art. 1335)
Art. 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.
Undue influence exercised by a third party vitiates consent, just like in the
case of violence and intimidation. (Memorandum to the Joint Congressional
Commiteee on Codification, March 8, 1951)
A B
• Violence
C
• Intimidation
Third person • Undue influence
Fraud? Atty. J_Ong_Oct 2020
Intimidation
Definition:
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.

Intimidation
• 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.

Undue Influence
Definition:
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.

Factor to considered in undue
influence
1. Confidential
2. Family
3. Spiritual and
4. other relations between the parties, or
5. The fact that the person alleged to have been
unduly influenced was suffering from
1. mental weakness, or
2. was ignorant or
3. in financial distress. (Art. 1337)

Kinds of Fraud
1. Dolo Causante – Annulment
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. (Art. 1338)
2. Dolo incidente – Damages
Incidental fraud only obliges the person
employing it to pay damages. (Art. 1344)

Fraud
• Failure to disclose facts, when there is a duty to reveal
them, as when the parties are bound by confidential
relations, constitutes fraud. (1339)
• The usual exaggerations in trade, when the other
party had an opportunity to know the facts, are not in
themselves fraudulent. (1340)
• 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. (1341)

Fraud
• Misrepresentation by a third person does not vitiate
consent, unless such misrepresentation has created
substantial mistake and the same is mutual. (1342)
• Misrepresentation made in good faith is not
fraudulent but may constitute error. (1343)
• In order that fraud may make a contract voidable, it
should be serious and should not have been
employed by both contracting parties. (1344)

Is the doctrine of pari
delicto apply in a
disbarment proceeding?
Carmelita Zaguirre vs. Atty. Alfredo
Castillo, A.C. No. 4921. March 6,
2003
• In a disbarment proceeding, it is immaterial that the
complainant is in pari delicto because this is not a
proceeding to grant relief to the complainant, but one
to purge the law profession of unworthy members, to
protect the public and the courts.”
• Respondent repeatedly engaged in sexual congress
with a woman not his wife and now refuses to
recognize and support a child whom he previously
recognized and promised to support. Clearly
therefore, respondent violated the standards of
morality required of the legal profession and should
be disciplined accordingly.
Employed by Employed by 3rd person
one of the
contracting
party
Violence Voidable Voidable
Intimidation Voidable Voidable
Fraud without Voidable Valid, unless it result to
connivance/ knowledge substantial mistake and
by the party benefited the same is mutual. It can
by the fraud be annulled on the
ground of mistake
Fraud with connivance/ Voidable Voidable. As if exercised

knowledge by the party by the party benefited by
benefited by the fraud the fraud.
Undue influence Voidable Voidable

Absolute simulated or fictitious Relative simulated
contract
The parties do not intend to be The parties conceal their true
bound at all. (1345) agreement. (1345)
VOID When it does not prejudice a
(1346) 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.
(1346)

SECTION 2. - Object of
Contracts
OBJECT OF CONTRACTS
• All things which are not outside the commerce of men,
including future things, may be the object of a contract.
All rights which are not intransmissible may also be the
object of contracts.
• No contract may be entered into upon future inheritance
except in cases expressly authorized by law.
• All services which are not contrary to law, morals, good
customs, public order or public policy may likewise be the
object of a contract. (1347)
• Impossible things or services cannot be the object of
contracts. (1348)
• The object of every contract must be determinate as to its
kind. The fact that the quantity is not determinate shall
not be an obstacle to the existence of the contract,
provided it is possible to determine the same, without the
need of a new contract between the parties. (1349)
SECTION 3. - Cause of
Contracts
CONSIDERATION
• To be a valid cause, it must be lawful, true and real,
definite or determinate as to its kind and possible.
• 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. (1350)
• The particular motives of the parties in entering into a
contract are different from the cause thereof. (1351)

CONSIDERATION
• Contracts without cause, or with unlawful cause, produce
no effect whatever. The cause is unlawful if it is contrary
to law, morals, good customs, public order or public
policy. (1352)
• The statement of a false cause in contracts shall render
them void, if it should not be proved that they were
founded upon another cause which is true and lawful.
(1353)
• Although the cause is not stated in the contract, it is
presumed that it exists and is lawful, unless the debtor
proves the contrary. (1354)
• Except in cases specified by law, lesion or inadequacy of
cause shall not invalidate a contract, unless there has
been fraud, mistake or undue influence. (1355)

CHAPTER 3
FORM OF CONTRACTS
FORM OF CONTRACTS
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. (1356) If the law requires a document or
other special form, as in the acts and contracts
enumerated in the following article, the contracting
parties may compel each other to observe that form,
once the contract has been perfected. This right may be
exercised simultaneously with the action upon the
contract. (1357)
Form of Contract
Failure to Contract Observe
comply the
form
Convenient Valid + Consensual Yes
Enforceable
Enforceability Valid + Statute of No
Unenforceable Fraud
Validity Void Formal or No
solemn
contract
Illustration: Oral sale real property
A B
P2 M

Illustration: Oral sale of personal property
A B
P800,000

Illustration: Partnership
ABC Partnership
A B C
P800,000

Illustration: Partnership
ABC Partnership
A B C
P800,000

Illustration: Lease contract
A B
P50,000/month

The following must appear in a public document: (1358)
1. Acts and contracts which have for their object the
creation, transmission, modification or extinguishment of
real rights over immovable property; sales of real
property or of an interest therein a governed by articles
1403, No. 2, and 1405;
2. The cession, repudiation or renunciation of hereditary
rights or of those of the conjugal partnership of gains;
3. The power to administer property, or any other power
which has for its object an act appearing or which should
appear in a public document, or should prejudice a third
person;
4. The cession of actions or rights proceeding from an act
appearing in a public document.
5. All other contracts where the amount involved exceeds
five hundred pesos must appear in writing, even a
private one. But sales of goods, chattels or things in
action are governed by articles, 1403, No. 2 and 1405.
(1280a)
CHAPTER 4
REFORMATION OF
INSTRUMENTS
REFORMATION OF INSTRUMENTS
Art. 1359. When, there having been a meeting of the
minds of the parties to a contract, their true intention
is not expressed in the instrument purporting to
embody the agreement, by reason of mistake, fraud,
inequitable conduct or accident, one of the parties may
ask for the reformation of the instrument to the end
that such true intention may be expressed.
If mistake, fraud, inequitable conduct, or accident has
prevented a meeting of the minds of the parties, the
proper remedy is not reformation of the instrument but
annulment of the contract.

Instances when there is be no Reformation
1. Simple donations inter vivos wherein no

condition is imposed;
2. Wills;
3. When the real agreement is void. (Art. 1366)

When reformation proper
• Mutual mistake of the parties causes the failure of the
instrument to disclose their real agreement (1361)
• One party was mistaken and the other acted
fraudulently or inequitably in such a way that the
instrument does not show their true intention. (1362)
• When one party was mistaken and the other knew or
believed that the instrument did not state their real
agreement, but concealed that fact from the former.
(1363)
• When through the ignorance, lack of skill, negligence
or bad faith on the part of the person drafting the
instrument or of the clerk or typist, the instrument
does not express the true intention of the parties.
(1364)
Who can ask for reformation?
A B
√ Mistaken √ Mistaken
√ Mistaken X Knowledge and concealed
√ Mistaken X Fraud
√ Fault of 3rd person √

CHAPTER 5
INTERPRETATION OF
CONTRACTS
INTERPRETATION OF CONTRACTS
• 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.
(1370)
• If the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over
the former.
• In order to judge the intention of the contracting
parties, their contemporaneous and subsequent
acts shall be principally considered. (1371)

INTERPRETATION OF CONTRACTS
• The interpretation of obscure words or
stipulations in a contract shall not favor the party
who caused the obscurity. (1377)
• When it is absolutely impossible to settle doubts by
the rules established in the preceding articles, and
the doubts refer to incidental circumstances of a
gratuitous contract, the least transmission of rights
and interests shall prevail. If the contract is
onerous, the doubt shall be settled in favor of the
greatest reciprocity of interests.

Multiple Choice
Contract Part 1
Multiple choice No. 1
Strictly speaking, which of those should not anymore
be considered an innominate contract?
a. Do ut des or I give that you give;
b. Do ut facias or I give that you make;
c. Facio ut des or I make that you give;
d. Facio ut facias or I make that you make.
Answer: A
DO UT FACIAS:
a. I give that you give
b. I give that you make
c. I make that you give
d. A make that you make
Answer: B
The characteristic of a contract to the effect that a
contract binds not only the contracting parties, but
also the heirs or assigns is called:
a. Autonomy of contracts
b. Obligatory force of contracts
c. Binding effects of contracts
d. Relativity of contracts
e. Consensuality of contracts
Answer: D
Contracting parties are free to enter into all kinds of
pacts, terms or stipulations provided they are not
contrary to law, morals, good customs, public policy
or public order. The above is a description of the
characteristic of a contract known as:
a. consensuality of contracts
b. building effect of contracts
c. autonomy of contracts
d. obligatory force of contracts
e. relativity of contracts
Answer: C
Which of these is a formal contract?
a. Donation of real property
b. A partnership where there is contributed real
property
c. Both of (a) and (b)
d. None of (a) and (b)
Answer: C
This is a real contract:
a. Deposit
b. Pledge
c. Mutuum
d. Antichresis
e. All of them
Answer: E
The mere liberality of the benefactor is the cause in:
a. Onerous contract
b. Remunetory contract
c. Contract of pure beneficence
d. All of the above
Answer: C
Which of these is proof of the perfection of a
contract of sale?
a. Option
b. Option money
c. Earnest money
d. All of them
Answer: C
Which of these contracts is consensual?
a. Mutuum
b. Commodatum
c. Partnership
d. Deposit
e. Mortgage
Answer: C
S in Manila offered to sell to B in Cebu his house and lot for
P10,000,000 giving the latter 60 days within which to
decide. B accepted the offer of S by a letter. While the letter
was on its way to Manila, B changed his mind and sent to S
another letter withdrawing his acceptance 2 days after his
first letter.
a. B cannot anymore withdraw the first letter of
acceptance.
b. B cannot anymore withdraw the letter of acceptance
specially if S has already received the same.
c. B can withdraw the acceptance because such
withdrawal was made before S received his first letter of
acceptance.
d. B can withdraw the acceptance even if S has already
received his letter of acceptance.
Answer: C
S offered to sell his house and lot to B for P5,000,000 giving
to him an option of 60 days within which to decide whether
or not to buy. After only 15 days, S met T who offered to
buy the same house and lot for P8,000,000. S then notified
B of the withdrawal of the option and proceeded to sell to
T. B files an action for damages against S.
a. B cannot recover damages from C because his option is
without consideration as something paid or promised.
b. B can recover damages from S because the latter
violated the option given to the former.
c. B can recover damages from S if B gave S option money
which will result in a perfected contract of sale.
d. Correct answer not indicated
Answer: A
F owes C P10,000,000. F dies leaving to the only heir S a
house and lot valued at P7,000,000. S voluntarily pays
P10,000,000. Decide:
a. In the first place, S is under no obligation to pay C
because the P10,000,000 is not his debt.
b. S is obligated to pay P10,000,000 because he becomes
liable for the debts of his predecessor-in-interest.
c. C cannot be compelled to return the excess of
P3,000,000 because it is the natural obligation of an
heir to pay the debts of his predecessor-in-interest if S
voluntarily paid P10,000,000.
d. If S paid C P10,000,000 the excess of P3,000,000 should
be the subject of an agreement between S and C
because it is unjust to S that he should lose his own
money of P3,000,000.
Answer: C
S orally sold to B his house and lot for P5,000,000 where B
initially paid P50,000. After paying the balance B now seeks
to register the lot in his name, but the Register of Deeds
refuses to do so. In this case:
a. The transaction involving the oral sale of a house and
lot is null and void.
b. The contract between S and B is unenforceable under
the Statute of Fraud.
c. The oral sale of the house and lot although
unenforceable under the Statute of Fraud has been
ratified by the receipt of the consideration and,
therefore, B can compel S to execute the deed of sale in
a public document.
d. If S does not want to execute the public document, he
can rescind or cancel his agreement with B.
Answer: C
Factor vitiating consent:
a. MORA
b. CULPA
c. Dolo causante
d. Dolo incidente
Answer: C
S offered to B the sale of his house and lot for 10,000,000
by means of a letter. At the same time, B offered to buy
from S the same house and lot by way of telegram for
P10,000,000 also. B has received the offer of S and S has
also received the telegram of B. Is there a perfected
contract of sale between S and B?
a. No, because what occurred was not a concurrence of
offer and acceptance but a crisscrossing of offers.
b. Yes, because the essential elements are all present,
namely: consent, object and consideration.
c. No, because the house and lot being an immovable to
perfect the contract it must be in a public document.
d. Correct answer not given.
Answer: A
This is not always an essential element of contract:
a. Consent
b. Object
c. Cause
d. Form
Answer: D
Statement 1: S orally sold to B a piece of land
P1,000,000 where the latter made a down payment of
P500,000 to the former, B can compel S to execute a
public document containing the sale.
Statement 2: In reformation of contracts, where the
mistake, fraud or accident prevented a meeting of the
minds, the remedy remains to be reformation and not
annulment.
a. Both statements are true.
b. Both statements are false.
c. Statement 1 is true, but statement 2 is false.
d. Statement 1 is false, but statement 2 is true.
Answer: C
Which of these is not subject to reformation?
a. Simple donations inter vivos where no conditions
are imposed.
b. Last wills and testaments.
c. Contract where the real agreement is void.
d. Where the fraud or mistake prevented a meeting
of the minds.
e. All of the above
Answer: E

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Week 14

Atty. J_Ong_Oct 2020

Atty. J_Ong_Oct 2020

Real estate mortgage Real property No delivery

Pledge Personal property Delivery

Antichresis Real property Delivery

Consideration or cause – Sale (price); Commodatum

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Option Money P10.000

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If the letter of revocation of acceptance is received before Jan 15?

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Fraud with connivance/ Voidable Voidable. As if exercised

Undue influence Voidable Voidable

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1. Simple donations inter vivos wherein no

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√ Mistaken X Knowledge and concealed

√ Fault of 3rd person √

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