➢ Art. 1323.
Offer becomes ineffective Option Money – is the money paid or
upon death, civil interdiction, insanity,
or insolvency of either party before
acceptance is conveyed.
- The acceptance will not produce a
meeting of the minds in case the offer has
already become ineffective because of the
death, civil interdiction, insanity, or
insolvency of either party before the
conveyance of the acceptance of the offer.
- At the time the acceptance is
communicated, both parties, offerer and
offeree, must be living and capacitated.
Other grounds which render offer
ineffective.
- Failure to comply with the condition of the
offer as to the time, place, and the manner
of the payment, the expiration of the
period fixed in the offer for acceptance,
the destruction of the thing due before
acceptance, rejection of the offer, etc. will
also render the offer ineffective and
prevent the creation of a contract.
➢ 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the offer may be withdrawn at any time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.
Meaning of Contract of Option; Option
Period; Option Money.
Option Contract – is 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
which will be perfected upon the
acceptance of the offer.
Option may also refer to the privilege
itself given to the offeree to accept an offer
within a certain period.
Option Period – is the period given within
which the offeree must accept the offer.
promised to be paid in consideration for the
option.
- It is not to be confused with earnest money
which is actually a partial payment of the
purchase price and is considered as proof
of the perfection.
Withdrawal of Offer where Period
Stipulated for Acceptance.
- When the offerer gives to the offeree a
certain period within which to accept the
offer, the general rule is that the offer may
be withdrawn as a manner of right at any
time before acceptance. The exception is
when the option is founded upon a
consideration, as something paid or
promised.
Ex.:
X offers to construct the house of Y
for a very reasonable price of 1M giving
the latter 10 days within which to make up
his mind.
Art 1324 vs. Art 1479
- A unilateral promise to buy and sell a
determinate thing not supported by any
consideration distinct from the price for
which that thing was intended to be sold
by or to the promise (offeree) does not
bind the promisor (offerer), EVEN IF
ACCEPTED, and may be withdrawn at any
time.
Art 1324 lays down the general rule
regarding offer and acceptance. Modified Art.
1479.
Art 1479 applies specifically to “a promise
to buy or sell.
➢ Art. 1325. Unless it appears otherwise,
business advertisements of things for
sale are not definite offers, but mere
invitations to make an offer.
- However, if the advertisement is complete
in all the particulars necessary in a
contract, it may amount to a definite offer
which, if accepted, will produce a
perfected contract.
Ex.:
 Definite Offer: “For sale: 200 sq. meters
lots at Green Plains Village, QC for 1M.
Tel no. 844-1284.
Not Definite Offer: “For sale: 200 sq.
meters lot at Green Plains Village, QC
located at the corner of Geronimo and
Magallanes St. for 1M.
➢ Art. 1326. Advertisements for Bidders
generally Not Definite Offers.
- Advertisements for bidders, advertiser is
not the one making the offer. In reality,
bidder is the one making the offer which
the advertiser is free to accept or reject.
- Acceptance by the advertiser of a given
bid is necessary for a contract to exist
between the advertiser and the bidder,
regardless of the terms and conditions of
his bid.
➢ 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.
Capacity to give consent presumed.
- It defines on the contrary who have no
capacity, by which it can be inferred that
capacity is the general rule, which exists
in those, of whom the law has not denied
it, since Civil Code does not define who
have capacity or legal ability to give
consent to a contract.
Persons who cannot give consent.
- Contract entered into where one of the
parties is incapable of giving consent to a
contract is voidable.
Voidable Contract – valid and binding until
it is annulled by a proper action in court.
1. Unemancipated Minors – Persons
who have not yet reached the age of
majority (18 years) and are still subject
to parental authority.
2. Insane or demented persons – The
insanity must exist at the time of
contracting. Unless proved otherwise,
a person is presumed sane.
3. Deaf-mutes – Persons who are deaf
and dumb. If they know how to write,
the contract is valid for then he is
capable of giving intelligent consent.
A person who does not know how to
write, does not know to read. A
contract entered into by a deaf-mute
who knows how to read is, valid.
Although he cannot write because of
some physical reasons.
Reasons for disqualification.
- Those persons mentioned can easily be
victims of fraud as they are not capable of
understanding or knowing the nature or
import of their actions. They can enter into
a contract only through a parent or
guardian.
➢ Art. 1328. Contracts entered into lucid
interval.
Lucid Interval – is a temporary period of
sanity.
- A contract-entered into by an insane or
demented person during a lucid interval is
valid, but it must be shown.
Effect of Drunkenness and Hypnotic
Spell.
- Impair the capacity of a person to give
intelligent consent.
- These conditions are equivalent to
temporary insanity, hence making it
voidable.
➢ Art. 1329. Incapacity declared in Art.
1327 subject to modification.
1. When necessaries such as food, are
sold and delivered to a minor or other
person without capacity to act, he must
pay a reasonable price therefor.
2. A minor 18 y/o and above may
contract for life, health and accident
insurance, provided the insurance is
taken on his life and the beneficiary
appointed is the minor’s estate or the
 minor’s father, mother, husband, wife,
child, brother or sister.
3. A contract is valid if entered into
through a guardian or legal
representative.
4. A contract is valid where the minor
misrepresented his age and
convincingly led the other party to
believe in his legal capacity.
5. A contract is valid where a minor
between 18 and 21 y/o voluntarily
pays a sum of money or delivers a
fungible thing in fulfillment of his
obligation thereunder and the obligee
has spent or consumed it in good faith.
Other special disqualifications may be
provided by law.
1. Under the Rules of Court, the
following are considered incompetents
and may be placed under
guardianship:
a. Person suffering the accessory
penalty civil interdiction
b. Hospitalized lepers
c. Prodigals (spendthrifts)
d. Deaf and dumb who are unable
to read and write
e. Of unsound mind even though
they have lucid intervals
f. Who by reason of age, disease,
weak mind and other similar
causes cannot without outside
aid, take care of themselves and
manage their property,
becoming thereby an easy prey
for deceit and exploitation.
- Contract entered into by any of the above
is valid except where it is voidable by
reason of incapacity under Art. 1327 &
1328 or of causes which vitiate consent
(Art. 1330) or where the incompetent has
been placed under guardianship. Thus, a
prodigal is presumed to have capacity to
enter into a contract.
a. Insolvents until discharged
b. Married women in cases specified by
law
c. Husband and wife with respect to sale
of property to each other
d. Other persons especially disqualified
by law
➢ Art. 1330. Contract where consent is
given through mistake, violence,
intimidation, undue influence, or fraud
is voidable.
Characteristics of Consent
1. It is intelligent. – There is capacity to act.
2. It is free and voluntary – There is no
vitiation of consent by reason of violence
or intimidation.
3. It is conscious or spontaneous. - There is
no vitiation of consent by reason of
mistake, undue influence or fraud.
Vices of Consent.
1. Error or mistake
2. Violence or force
3. Intimidation or threat or duress
4. Undue influence
5. Fraud or deceit
Causes of Vitiating Consent vs. Causes
of Incapacity
Causes of Vitiating Consent –
temporary; refers to the contract itself
Causes of Incapacity – more or less
permanent; refers to the person entering
into the contract.
➢ Art. 1331. Mistake or Error.
Meaning.
Mistake or Error is the false notion of a
thing or a fact material to the contract.
Nature.
1. Mistake may be by fact or law. –
Mistake by which Art. 1331 refers is
mistake of fact. It may arise from
ignorance or lack of knowledge.
2. The mistake contemplated by law is
substantial mistake of fact. The party
would not have given his consent had
the known of the mistake.
3. The mistake may be unilateral, when
only one party is mistaken about a
 material fact or bilateral (or mutual)
when both parties are in error.
Mistake of Fact to which Law Refers.
1. Substance of the thing which is the
object of the contract.
2. Those conditions which have
principally moved one or both parties
to enter into the contract.
3. The identity or qualifications of one of
the parties provided the same was the
principal cause of the contract.
Mistake of Fact which Does Not Vitiate
Consent.
1. Error as regards the incidents of a
thing or accidental qualities thereof,
unless the error is caused by fraud of
the other party.
2. Mistake as to quantity or amount does
not also vitiate consent but only gives
rise to its correction unless it goes to
the essence of the contract.
3. Error as regards the motives of the
contract does not also vitiate consent
unless the motives constitute a
condition or cause of the contract.
4. Mistake as regards the identity or
qualifications of a party does vitiate
consent for the reason that contracts
are entered into more in consideration
of the things/services which form their
subject matter rather than of persons.
5. Error which could have been avoided
by the party alleging it, or which refers
to a fact known to him, or which he
should have known by the exercise of
ordinary diligence, or which is so
patent and obvious that nobody could
have made it, will not invalidate
consent.
Effect of Mistake of Account
1. Where mistake simple – A simple
mistake of account or calculation does
not avoid a contract because it does
not affect its essential requisites.
2. Where mistake gross – Where the
mistake was so gross that it was clearly
apparent to one party and therefore,
would be impossible to escape his
notice, said party cannot avoid liability
on the ground of mistake in
computation.
➢ Art. 1332. Burden of proof in case of
Mistake or Fraud.
- 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.
➢ Art. 1333. Effect of knowledge of Risk
- There is no mistake if the party alleging it
knew the doubt, contingency or risk
affecting the object of the contract.
➢ Art. 1334. Mistake of Law.
Meaning.
Mistake of Law – which 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.
Effect of Mistake of Law
- Does not invalidate consent because
“ignorance of the law excuses no one from
compliance therewith” – this is based on
public policy, dictated by expediency and
necessity.
When mistake of law vitiates consent.
- Mistake of law does not generally vitiate
consent. But when there is a mistake on a
doubtful question of law or on the
construction or application of law, this is
analogous to a mistake of fact, and the
maxim of ignorantia legis neminem excusat
should have no proper application.
 Requisites for the Application of Art.
1334
1. The error must be mutual.
2. It must be as to legal effect of an
agreement.
3. It must frustrate the real purpose of the
parties.
➢ Art. 1335. Violence or Force;
Intimidation or Threat
Nature of Violence or Force.
- Violence requires the employment of
physical force.
- To make consent defective, the force
employed must be either serious or
irresistible.
Nature of Intimidation or Threat
- For intimidation to vitiate the consent of a
party to a contract, the following requisites
must be present:
1. It must produce a reasonable and well-
grounded fear of an evil.
2. The evil must be imminent and grave.
3. The 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 need not resort to physical
force. Intimidation is internal while violence
is external.
Factors to determine degree of
Intimidation.
- Whether or not the fear is reasonable and
well-grounded or the evil imminent and
grave depends upon the circumstances.
- If a contract is signed merely out of
reverential fear or the fear of displeasing a
person to whom respect and obedience
are due, the contract is valid for
reverential fear by itself does not annul
consent in the absence of actual threat,
unless the fear so deprives one of the
reasonable inference that undue influence
has been exercised.
Threat to enforce just or legal claim.
- The threat of a court action as a means to
enforce a just or legal claim is justified and
does not vitiate consent.
➢ Art. 1336. Violation or Intimidation by a
Third Person
- 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.
➢ Art. 1337. Undue Influence.
Meaning.
Undue Influence – is influence of a
kind that so overpowers the mind of a
party as to prevent him from acting
understandingly and voluntarily to do
what he would have done if he had been
left to exercise freely his own judgment
and discretion. Influence must be undue
or improper to avoid a contract.
Circumstances to be Considered.
1. Confidential, family, spiritual, and
other relations between the parties.
2. Mental weakness
3. Ignorance
4. Financial Distress of the person
alleged to have been unduly
influenced.
➢ Art. 1338. Causal Fraud
Meaning.
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.
How Causal Fraud Committed.
- This may be committed through insidious
words or machinations or by
concealments.
- Insidious words or Machinations include
any misrepresentation in words or actions
done with a fraudulent purpose.
 Requisites of Causal Fraud. Dealer’s talk or Trader’s Talk are
1. There must be misrepresentation or representations which do not appear on
concealment of a material fact with the face of the contract and these do not
knowledge of its falsity. bind either party.
2. It must be serious.
3. It must have been employed by only one
of the contracting parties.
4. It must be made in bad faith or with intent
to deceive the other contracting party who
had no knowledge of the fraud.
5. It must have induced the consent of the
other contracting party.
6. It must be alleged and proved by clear
and convincing evidence.

➢ Art. 1339. Fraud by Concealment.

- A neglect or failure to communicate or
disclose that which a party to a contract
knows and ought to communicate
constitutes concealment.
- In this case, concealment is equivalent to
misrepresentation or false representation.
- The injured party is entitled to rescind or
annul the contract whether the failure to
disclose the material facts is intentional or
unintentional as long as there is a duty to
reveal them and the party is misled and
deceived in entering into the contract.
- If failure is unintentional, the basis of the
action for annulment is not fraud but
mistake or error. Even if intentional but
there is no duty to make the disclosure,
the parties are bound by their contract.

➢ Art. 1340. Usual exaggerations in trade.

- The usual exaggerations in trade, when
the other party had an opportunity to
know the facts, are not in themselves
fraudulent.
- The law allows considerable latitude to
seller’s statements or dealer’s talk and
experience teaches that it is exceedingly
risky to accept it at its face value.
- Customers are expected to know how to
take care of their concerns and to rely on
their own independent judgment.
- Any person who relies on said
exaggerations does so at his own peril.