TITLE |) (Arts. 1305-1479, Chl oe ) Chapter 1 GENERAL pr, rhb ART. 1305. A contract between two persons whereby . : | s, y one binds himself, | with respect to the Other, to give something or to render some service, (1254 so an ‘nconsderakon Sinan Ae Ger Forty ey ga, or cerder in vednonge Meaning of contract. thera! ¥ e The above article gives the definition of a contract. It lays emphasis on the meeting of minds between two contracting parties which takes place when an offer by one party is accepted by the other. (Art, 1319) In a contract, one or more persons bind himself or themselves with respect to another or others, or reciprocally, to the fulfillment of a prestation to give, to do, or not to do, OVISIONS ISameeting of minds Ina contract, there must beat least two persons or parties, because it is impossible for one to contract with himself. Contract and obligation distinguished. Contract is one of the sources of obligations. (Art. 1157.) On the other hand, obligation is the legal tie or relation itself that exists after a contract has been entered into. 285 Scanned with CamScannerntl THELAW ON OBLIGATIONS AND fe 286 CONTRACTS: ag rene BBE CAM be no contractif there is nO obligation spligiif® May exist without a contract. But an tract and®9teement distinguished. Cor gird a ABreements enforceable through legay or ings T° @Breements which cannot be enfore Pron inthe CUS OF justice (like an agreement to Bote ate pan) 22 7OE contracts but merely moral or Speig a inet -Anagteement is broader than a contract because sorener maj%ePAVe al the elements ofa contract. (Age e 1318) o, al contac Fe agreements but not all agreements are contracts. ‘ART. 1906: The contracting parties may establish such Stipulations, clauses, terms and conditions @S they may deem convenient, provided they af@ not contrary to law, morals, good customs, Public order, or public policy. (1255a) Freedom to contract guaranteed, The right to enter into contract is one of the liberties guaranteed to the individual by the Constitution. (Article Il Sec. 10 thereof.) However, the constitutional prohibition against the impairment of contractual obligations refers only tolegally valid contracts. Gan Diego vs. Mun. of Naujan, 107 Phil. 18} Inappropriate cases, it cannot be invoked as against the right ofthe state to exercise its police power. (infra.) In other words, an individual does not have an absolute right ‘0 nterinto any kind of contract, ‘ However, because the freedom-of contract is both a constitutional and statutory right; to uphold the right courts are enjoined to move with the necessary caution and Bens holding contracts void. (Gabriel vs. Mateo, 71 p06 CENERAL PROMO imitations on contraetuay ‘here are limitations oy (1). Lm. — Tis a fundéne ec dat ne ue enanttan epic wah hy rd pt inevery contract. The law thus sets mite (Martie one in Phil. vs. Reparations Com ime Co. of mission, 40 (2). Police power* — When SCRA70) Stipulations, \¢ freedom tocontract, 5 plied reserv: — to the posible fers of he pole power af the a Far from being an impairment, of contractual obligations, the exercise of such power constitutes, amereenjorcenmntofore sf the conditions deemed imposed in al Bank ofthe Phil. vs. Cloribel 44 SCRA apy) vos ome Contract must not be contrary to law. In its specific sense, law has been defined as “a rule of conduct, just, obligatory, promulgated by legitimate authority, and of common observance and benefit” (I Sanchez Roman 3) Accontract cannot be given effect if itis contrary to law because law is superior to a contract. (Art. M409{I]) As executed against the provisions of mandatory or prohibitory laws are void, except when the law itself authorizes their validity. (Art.5.) The contracting parties must respect the law ‘which is deemed to be an integral partof every contract. (see Article 1315.) “Tolice power has ben ele to the power fhe sate erat ms cx regulations in reation oper and proper es may roma public eth, cei ri teeta {eS va Gomes 3 P18) ante mately poh tat est and plenary power inthe state which esi prokh comfort safety, and wel fect (bivs Prova ou 3 FL) Scanned with CamScanner mA mssWON OBLIGATIONS AND THELAW ON OBLIGAT = seg tract must not be contrary on ‘morals. as deal with norms of good and right con it duce " unity. These norms may differ at diff evavedin vines and with each group of people, eat ES: Cars “Acontract whereby X promised to i ve a nife of Y without the benefit of marge’ % a arriage j comm on of P100000.0's immoral and, thereto (Ge Batata vs Marcos, 7 Phil. 156) (2) Anageement when Xis to ender sevic gg 'Y without compensation as long as X has not seis prhensibleand censurabe, (eeeDelo eee ‘Aljado, 16 Phil 498.) Its also contrary to law. (Art. 1699) Contract must not be contrary to good customs. Castoms consist of habits and practices which through long usage have been followed and enforced by society some part of it as binding rules of conduct. It has the force oflaw when recognized and enforced by law. "Good customs are expressly mentioned, although roralsarealeady specified. The spheres of moralsand god customs may frequently overlap each other but sometimes they do not.” (Report of the Code Commission, p. 134) EXAMPLE: X entered into a contract whereby X binds himself to slap his father. This contract is void because it is against the ood custom of showing respect to our parent Contract must not be contrary to public order. __,_ Public order refers principally to public safety althous ithas been considered to mean also the public ma 4 2 order. Contract must not be contrary to public policy, Public policy is broader than Public order, may refer not only to public safety but aloo roconidecnnns which are moved by the common, ‘800d. (Ibid.; see Art. 1416,) Accontract which has a tendency nt a °y to be injurious to the uublic oF is against the public good is contrary to public olicy. Actual injury need not be show palo. al m. (Sy Suan vs. Regala, EXAMPLE: ‘ Xeole the Sur OF. Later they entered into a contrat whereby Y would not prosecute X in consideration of 50,000.00. P consideration of Its to the interest of society that crimesbe punished. The agreement between X and Y is, therefore, contrary to public policy because it seeks to prevent or stifle the prosecution of X for theft. To permit X to escape the penalties prescribed by Jaw by the purchase of immunity from Y, a private individual, would result in a manifest perversion of justice. (Arroyo vs. Berwin, 36 Phil. 386; Velez vs. Ramas, 40 Phil. 787.) NG hae, ART. 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the provisions of Titles | and'll of this Book, by the rules governing the most analogous nominate conti and by the customs of the place. (n) Classification of contracts according = to Its name or designation. | They are: 7 at Scanned with CamScanneryON OBLIGATIONS AND » stant ote = that which hasa atecontract oF ' (Nominate or ommodatum, lease, agen ? ation in 3 = cor design’! and : a Innominate contract or that which has no on ame or designation it Jaw xands of nominate contract are: oe oa dsl give that you may Bive)~ Lae (3) deutfi( give tal You may do); jon des (Ld that you may giv) (4) tou fcias (do that you may do). out desis however no longer an innominate contracy iuhasaeady been given a name of is Own, i, barter o¢ change. (Art 1638) Reasons for innominate contracts. ‘Theimpossibility of anticipating all forms of agreement on one hand, and the progress of man’s sociological and economic relationships on the other, justify this provision, (6 Manresa 623-625.) A contract will not, therefore, be considered invalid for failure to conform strictly to the standard contracts outlined in the Civil Code. Itis sufficient that it has all the elements of a valid contract. (Arts. 1318, 1356) Rules governing innominate contracts. Tnnominate contracts shall be governed by: () the agreement ofthe partes; (2) the provisions of the Civil Code on obligations. and contracts; 9) the rules governing the most analogous con- (4) the customs of the place. 08-1209 GENERAL PR nae ‘OMIIONS labs sey = ART. 1908. Tino, Tones tract must bi tracting parties, its validity onset left to the will of one Principle whiny 2588) contract binds both contracting parties, A contract is an agreement which s.ftmust bind both pares inorder thatitcan be onto inst either. Without this equa ae agrnot be said thatthe contrat hac eee oe Parts it them. (Art. 1159.) It is a fundamental rule that no party can renounce violate the law ofthe contract without theconaene ofthe other Hence, “its validity or compliance cannot be left to the will of one of them.” (Art. 1308; see Art. 1182) gives rise to obliga- tion: EXAMPLE: Sagreed to sells car toB for P100,000.00, The contract is binding upon both contracting parties and cither of them can enforce the contract against the other, ‘Asstipulation in the contract to the effect thatthe contract shall be considered invalid if so declared by § or that S can comply with his obligationit he wants Art. 1182) without the same privilege being given to Bis void because the contract does not bind both of them. Nor can § alone determine the price of the car which price is binding upon B whether he accepts it or not. Acontractisameeting of the minds and, therefore there must be mutual consent, (Arts. 1305, 1319.) But ifthe price fixed by $ is accepted by B, the sale is perfected. (see Art. 1473) IfS or B alleges fraud, he must ad- duce satisfactory evidence ART. 1309. The determination of the perfor- mance may be left to a third person, whose deci- sion shall not be binding until it has keen made known to both contracting parties. (n) : Scanned with CamScannerON OBLIGATIONS AND THE LAN CONTRACTS ia, Determination of performance ‘py a third person. the preceding article, compliance with a neato he wil of one ofthe conta cing can the above provision, the determis der s However ce may be left toa third person. (se Arg me J peor case the obligation doesnot depend yi potstative condition. See At. 1182) ; decision, however, shall bind the parties only, it! ee made known to both of them. 'Y after, EXAMPLE ‘cold his parcel of land toB. It was agreed that, estate appraiser, would be the one to determine the ag! the land. (see Art 1469.) C, then, fixed the pr abepriceof ‘her eonsideing all the circumstances and factors afecing the value ofthe land. In this case, C must make known his decison to § ang B who will be bound by the same, ART. 1310. The determination shall not be obligatory If it is evidently inequitable. In such case, the courts shall decide what is equitable under the circumstances. (n) Effect where determination inequitable. This article is a qualification to Article 1309. A contract. ing party isnot bound by the determination ifit is evidently inequitable or unjust as when the third person acted in bad faith orby mistake. Insuch case, the courts shall decide what is equitable under the circumstances es Pari ron, Contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir Prrape OF Relabvty ot con at RAL Monsions is not liable beyond received from the eee Of the property he Ha contract should con, ld in favor of a thirg erantain some stipulation i Pe its fulfillment provideg ieee demand icated his acceptance to the obj; m mere incidental benet oo its revocation. A not sufficient. he contrary clearly and deliberate) third person. (1257q) ° Merred persons affected by a contract, (1). General rule, — Contract the partis, their assigns (ie, tamsone ae _. rmeans that only the partis ther assigns and hei cnr hens rights and obligations under the contract As a rule the et declaration, or omission ofa person cannot affectorpreiadine another (see See. 28, Rule 130, Rules of Court) without the |atter’s authorization or ratification, oe EXAMPLE: Dis indebted to C in the amount of P10,000.00.D an Care the parties to the contract — Jf C dies, D must pay the heirs of C. If C assigns his credit to X, then Dis liable to pay X, - IF D dies and H is the heir, then H assumes the obliga: tion of D to. (see Arts. 776,781.) His bound by the contract. entered into by D, his predecessor in interest in view ofthe privity of interest betwoen him and D. However, H isnot liable beyond the value of the property he inherits from D, the decedent. (Art. 1311, par. L) ° (2). Exceptions. — The cases. when a contract are effective only between the partes are when the rights and obligations arising from the contract are not transmissible: (a) by their nature (like a contract involving personal qualifications, as painting, singing, etc); or Scanned with CamScannerjv ON OBLIGATIONS AND THE LAW CONTRACTS: Ary tipulation (in accordance with hy provision oflaw (2Sin AgENCY, Partners and © un, when death extinguishes the ‘Rlationships). (Axt- 1178.) Gases when strangers OF third persons ‘affected by a contract. i hhasnot taken part ina ‘Athird personis one who wd andis, Mhaveforeastranger othe contract. Asa general ule ghd yersonhasnorighsand obligations under contractg trie Pre sastrange. (Art 1311 par.) He has no standing inlaw to demand the enforcement ofa contract or question its validity There a affected by a contract. At (1) Incontracts containing a stipulation in favor ofa third person stipulation pour autrui) (Art. 1311, par 2 (2). Incontracts creating real rights (Art, 1312); 3). Incontracts entered into to defraud creditors, (art 1313);and (4) In contracts w' inducement of a third pers prin hip, Tegal re cases, however, when third persons may be mong, such cases are the following: ich have been violated at the on. (Art. 1314.) Meaning of stipulation pour autrui. “It isa 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 tothe obligor beforeiis revocation. Classes of stipulations pour autrui. Stipulations in favor of a third ivi into two classes, namely: jee GEN atl FERAL PROVISIONS 25 (a) Those where thestipulation efit of Such Person. This son Stet forthesole by vet vs. Leonard 30 Phi 471) hel ty is ai tobea dance benef ary while inthe second hes called editor bonetciny requisites of stipulation pour autrui, ‘They are the following: (1) The contracting parties by their stipulati 1507 ; (2) The third person must have communicated his acceptance to the obligor before its revocation by the obligee or the original partie (3) The stipulation in favor of the third person should bea part, not the whole, ofthe contract; (4) ‘The favorable stipulationshould notbe conditioned or compensated by any kind of obligation whatever; and (5) Neither of the contracting parties bears the legal representation or authorization ofthe third party for otherwise, the rules on agency will apply (see Florentino vs Encarnacion, 79 SCRA 193.) EXAMPLES: ‘ (1), DowesCP10,00000 payableatter one year at 12% interest. It was agreed that the interes of P1,200.00 would be given to T to whom Cis indebted for the same amount, Scanned with CamScannerJON OBLIGATIONS AND THELAN CONTRACTS Atay T must communicate his acce In this erection ofthe stipulation by the arth the same will be effective. From the momen isis hesaTeplaceis duly made, T becomes or The promise (C) i a contract con congrats ened to brig an action 83 stipaeent oro prevent is breach inthe same i ‘Fabeneficary (1) tere. (id) fp) Xeontacts with Y for the erection ofa but nid ebance te value of2'adnning propery a8 vig tz may incidentally derive some benef yp ha eskimo right tosueXfor breach ofthe conta fea & Morin, Business Law p47) ART. 1312. In contracts creating real rights, third persons who come into possession of the Sbjct ofthe contract are bound thereby, subject ihe provisions of the Mortgage Law and the Land Registration laws." (n) Place, Manner 3b Third persons are bound by contracts; creating real rights. ‘This article is an exception to the general rule that a contract binds only the parties. “Third persons who come into possession of the object of acontractover which there isa real right, are bound thereby. even if they were not parties to the contract. A real right is binding against the whole world and attaches to the property ‘over which itis exercised wherever it goes. (see Art. 1164) ‘Thus, a contract subjecting certain real properties to the payment of certain debts, registered in accordance with the Property Registration Decree, constitutes a real right, which is produced not by the contract but by the publicity given FB Deas No ths oti he sem lmao ude be Spanish Metgoge Law and hus ol Spanish ites inland registration proceedings. ‘This sontnsanceis tere in Pres. Decree No. 159, the Property Registration _ Decree which supersded the ferme Land Registration Ac. 13134 ony ae ERALPROVISIONS ™ he Registry, persons However, if therealrightis ne cd in good who acte ate pro Sythe Property Registration fit! tun EXAMPLE: Damortgaged his patel of is det eclofland in favor forbs bt The morgage atta ascy of Property Lateron,Dsold the suns er inh REY In this case, Tbought the and sujet ot constituted therwon.Inother words, Tisbound by the ee between D and C although hes strane eo econ because the right of C to the morigane eee comeaet follows the property wherever petit ines) such publicity pre Publicity prejudicng the Fight of third ed, third persons er the provisions ART. 1313. Creditors are protected i of contracts intended to defraug hem (") “s Right of creditor to impugn contracts Intended to defraud them, Article 1313 is another qualification to the rule that contracts take effect only between the parties. The ereditor is given the right to impugn the contracts of his debtor to defraud him. (Art. 1177) EXAMPLE: Dis indebted to C in the amount of P10,000.00:D sells a parcel of land to T in order that C may not attach the land in payment of his debt and D has no other property. C, who isa stranger tothe contract between D and, 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, (ee Art 1381(3], 1387) ART. 1314, Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. (n) Scanned with CamScanner EEE s SLT:‘ ON OBLIGATIONS AND THE LAW OS TRACTS M1544 = ‘of third person responsible foreach of contract. rae of American la: Is also prope ss ap ciples of the Philippine law, becau: ee ght is property. (Report of the Code Cor tra 135) 7 izes an instance when a strap, Aste ene ued for damages for his unvwarangt to a conte the contac. It presupposes thatthe contag, interferer his valid andthe third person has knowlege ihe existence of the contact. EXAMPLE: ned toselhis parcel ofTand 18 for P1000 000.9 ¢ this case, B can sue D for damages. However, Ir of for damagescannot be more than that ofS forthe deter’ latin of his contrat. Tobold Disb for damages irevces of those that can be recovers against § “woutg ind ta ala once gts and ure Dayan rporacion de PP-Agustinos Recotetos, 39 Phil. 38>) om any able with - What would be the source ofthe obligation of D? His lability willbe based on the theory of quastlict. see Art 11571}; see People’s Bank & Trust Co. vs. Dahican Lumber Co, 20SCRA 381) Liability for T Und, ler Se acon, MIMission, om PK ~atescys- (A Stan, 1315, Contracts are perfected by mere “lt eet and from that moment the parties are 98075)" bound not only to the fulfillment of what has sf en expressly stipulated but also to all the a . consequences which, according to their nature, Te" ay be haepig wih good fat, usage and law ‘ART. 1316, Real contracts, such as deposit, pledge and commodatum, are not perfected until the delivery of the object of the obligation. (n) eo 151316 ce a SUL PROM sification of contrag Clasp perfection, ‘They are: (1) Consensual cont spore consent (68, sale (2) Real contractor that wh erivery ofthe thing subj i drpestu, Pledge, commedatun) (963, 2093.) and ()_ Solemn contract or that i i cnc mp form being thereby an essential element teensy form being athke m reo (eg. dona- eran 9 pep 'Y which must bein a public instrument) iccording Tact or that which is nfected by ase agency) (Art. 1g) Perfected by the er of the contract (e,, (Art. 1316; see Arts. 1934, stages in the life of a contract, ‘They are: (1). Preparation or negotiation, steps taken by the parties leading contract. At this stage, the parties ha definite agreement; ~ This includes all the to the perfection of the We not yet arrived at any (2) Perfection or birth, ~ Ths is when the parties have come toa definite agreement or meeting of the minds regard. ing the subject matter and cause ofthe contract (Art. 1319.), i¢., upon concurrence of the essential elements thereof; and 3). Consummation or termination, ~ This is when the parties have performed their respective obligations and the contract may be said to have been fully accomplished or executed, resulting in the extinguishment or termination thereof. EXAMPLES: (1) 5 offers to sell his carta B for P 200,000.00. B asks Sto show him the car. Later, S brings the car and shows it to B. B offers to pay 160,000.00 for theca Scanned with CamScanner mice” 1WONOBUGATIONSAND Ang o THELAW ON OTE ACTS Bag ries are taking all the steps that Here, the part tack ™Y leag tote pe 5 agzest9 tHe or P60 09 @ fected because there is a meeting of the 9p; he conta Pret mater and the cause ofthe contrac, tract willbe consummated after det apy PIS00.0.B becomes the oxen thecar to Bani gwner ofthe money paid by B, the car and S. ww contracts are perfected. (4), Consensual comracts, — Asa general nile, contracy A ted by mere consent of the Parties regarding ine are pereter and the cause ofthe Contract. (Arts, 1316 sa ey are obligatory’ in whatever form they may hayg Fay rced into, provided all the essential requisites fp pet ality are present. (Art, 1356.) Almost all contragy, i eens ast is perfection, They come into existence spon thir perfection by mutoal consent, even if the subj matter othe com thas not been delivered Owner of Hoy Inthe absence of delivery, perfection does not transfer ttle or create real right, yet it gives rise to obligations bing. ing upon both partes. (Arts. 1305, 1308,) EXAMPLE: Today Sand B enter into a contract whereby S bind Frimsel to sel his car to B for 200,000.00. ‘Thecontractisdeemed perfected although there sas yet no delivery of the car and payment of the price. Both parties, acquire the right to demand from the other the fulfillment of his obligation: to deliver the car on the part of S, and to pay the amount of P200,000.00 on the part of B. (2). Rea! contracts. — The exceptions are the so-called real contracts which are perfected not merely by consent butby the delivery, actual or constructive, of the object of the obligation. (Art. 1316.) These contracts have for their purpose restitution because they contemplate the retum by a party of ‘what has been received from another. ’ 0186 CORAL oon x EXAMPLE: Dborrowed from cp; 5, D promised to pledge hig qin nt ASSeCUty forthe debe, = Tingtoc. Beforethedeiveryottheringteces ignot yet perfected "SIO, te contactofpldge IED later on refuses a pledge the the payment ofthe obligatga aS HN, C can de (Art 198121.) But Cage” tho an igh itis with a peri neat aie Dds ee security Because there sno el contract of pledge yet There is merely a consensual eng exists is. personal right the righ ora 2 lsd What to demand the constitution ofthe pledge ort yartetc (3). Solemn contracts, — Whey : contract be in some form tobe valid (Aa. ase i sary ali (Art. 1356), thi form is necessary fo its perfection, Thos, a operty cannot be perfected untilitisembodied inn ae fastrument. (Art, 749.) ina public "n the law requires that a Effect of perfection of the contract, From the moment the parties come to a a definite subject matter and valid co pound not only — (1) tothe fulfillmentof what hasbeen ex lated but also; Mn agreement on sideration, they are pressly stipu- (2) to all the consequences which according to their nature, may be in keeping with good faith, usage, and law. (art. 1315.) EXAMPLES: (1) $ sold a horse to for P15,00000. The details of this contract as regards the place of delivery of the horse and. ‘payment of the price, the ime of delivery and payment, etc, are not included. These details are furnished by aw and have been taken up in the various provisions of the Code. 2) $ agreed to sell his horse to B. It was stipulated that $ should deliver the horse to B the next day. Scanned with CamScannerWON OBLIGATIONS AND THELAN CONTRACTS Any obligation to deliver A thse cn in the conn” ‘sie the oot ny 5 oP cae ote orse pending i hy the bial Pe as the right to sll the horse og) to war oat te gation nthe conta th th good faith, usage, and law. i: No one may contract in the nay A out being authorized by the later of anotet nas by law aight fo represent him orn eonraceneredintointhename of anoth, pono has no authority o legal represents ewino has acted beyond his powers, shay cable, unless itis railed, expressiy e medly, by the person on Whose beholtithag orm ected, before its revoked by the other contracting party. (1259a) by on tion, oF be unenfore Unauthorized contracts are unenforceable, ‘Asa general rule, a person isnot bound by the contra of another of which he has no knowledge or to which he hae not given his consent, Acontract involves the free wil ofthe pariesand only he who entrsinto the contract can be boung thereby, (see Art. 1311, par. 1.) Thus, under Article 1317, 3 contract entered into in the name of another by one who has no authority is unenforceable against the former unless itis raed by him before itis revoked by the other contracting party, (see Art. 1403{1]) ‘An unauthorized contract is not to be confused with a contract forthe benefit of a third person who may demand its fulfillment provided the requisites mentioned (supra.)are present. (see Art. 1311, par. 2.) Unauthorized contracts can be cured only by ratification. ‘The mere lapse of time cannot give efficacy to such a ‘contract. The defects such that it cannot be cured except by 137 ong at AL ROMSOns ie subsequent ratificato same the CONEEACL Was en 08! vs. 3 (ALE. 1405, of tered i of the person in wo entandnotby anyother °° bis duly suthoy Velasco, 6 Phil. 67)" P®S° Roto empower (Tipton ratificatic aa doubtorya tt Clear and express so a not to fie, 72 SCRA 28) 8 sangre EXAMPLE: , D borrowed 10,099, 1000.00 from ¢ executed a promissory note in whose favor he oe. nt H Prever authorized D toborraw nen rience ney froin C, : Inthiscase the contactotD iso jowever, Pcan subseque ariel already nen cee ot son he cnat party. Ratiicati from the moment the contrac If the contract has already bee bbe revoked by C. see Ar. 1901) When a person is bound by the contract of another. In order that a person may be bound by the contrat of another, there are two requisites: (1) The person enteringinto the contract mustbe duly authorized, expressly or impliedly by the person in whose namehe contracts orhe must have, by aw, right torepresent him (like a guardian or an administrator); and (2) He must act within his power. 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 ofthe powers granted by the principal. (see Art. 1897.) Scanned with CamScannerAME TNS eeaeR THE LAW ON OBLIGATIONS AND a CONTRACTS Att.131p EXAMPLE: P (principal) authorized A (agent) to sell his Car fo 200,000.00 cash. A sold the car to C tor 200,000.00 payably in ten (10) monthly installments In this case, P cannot be compelled by C to accept the monthly installments and to deliver the car because A acted beyond his powers unless there has been ratification byP.A is personally liable to C for damages. STUDY GUIDE me we Scanned with CamScannerChapter 2 ESSENTIAL REQUISITES OF CONTRACTS GENERAL PROVISIONS ‘ant, 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 estab. lished. (1261) [Conidetahyn Classes of elements of a contract. They are: (1) Essential elements or those without which no con. tract can validly exist. They are also known as requisites of contract. They may be subdivided into: (2) common or those present in all contracts, namely, consent, object, and cause (Art. 1318,); and (b) special or those not common to alll contracts or those which must be present only in, or peculiar to, certain specified contracts, and such peculiarity may be: a ‘ 1) asregards to form, as for example, public instrument in donation of immovable property (Art. 749), delivery in real contracts (Art. 1316), 306 ESSENTIAL e318 LR Sun SOF CONTRACTS registration in rea) estat . cen Mortgage (A 2140) cere (Art. 2125), Sk ) ete or comple fer ts Subject matter, as for Personal property in ojey antichresis (Art. 2132, 3) ec retY pledge (Are 2064) te : 7 (2) Natural elements op sncertain contracts unless bigs thatare presumed to exist by the parties, like warranty warranty against hidden de 9) Accidental element clauses, terms, ot conditions established by their contract eat ior slike conditions, yas Past tn penalty, etc, and, therefore, they exc e expressly provided by the pain cal Sees Against eviction (Art. 1548), ),or fects in sale (Art. 1561,); and 0004 Looe aPerass of bitonowy - e ny a Principe CE Nuhaity- 3? Cy Ciigatory forte oF cayteced- 4 Parca OF fidalily © Yooige, gp Constrbuality “IF the instrument in which areal estate mortgage appeats is nat inthe Registry of Property, it is nevertheless binding between the parties. (Ar 2125) i | Scanned with CamScannerSECTION 1.— Consent . Consent is manifested by th, aa. Gv rane he retin ‘and the cause which are to constitute the thing “ct. The offer must be certain and the tecoptance 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 tons knowledge. The contract, in sucha case, ig presumed to have been entered into in the place where the offer was made. (1262a) Meaning of consent. Consent is the conformity-ar concurrence of wills offer and acceptance). and with respect to contract s the agreement ofthe will of one contracting party with that of another or others, upon the object and terms of the contract, (4Sanchez Roman 191; 8 Manresa 648.) It is the meeting of minds between the parties on the subject matter and the cause which are to constitute the contract (Arts. 1305, 1319) even if neither has been delivered. Meaning of offer. Offrisa proposal madeby one party to another o enter inta-a contract. It is more than an expression of de or hope. Its really a promise to act or to refrain from acting on condition that the terms thereof are accepted by the person (offeree) to whom it is made. 308, 1319 ESSENTIAL Rey at Cones OF ‘CONTRACTS = offer must be certain, ‘The offer must be certain o7 4c (or he Bhs) ofthe panes orgie Sothat the ailty may b jg necessary that the acceptance be cx2 fixed because it tocreate a contract without any fonoetial with the offer offeror acton the part of the EXAMPLES: () “Wil youbuy th a 'y this watch for Piooga.gage 2) “Lam wit for Psono000n! neers of my and toyou will not create a contract. S W"e=n. Its acceptance Thisis @) “Lam wiling wb : offer because itis iocente Pee is also no 4) _"Lamwillngtosll my carfor Pung Here, the determination of ; the offeree. ‘ation of the manner of payment is left to Meaning of acceptance. Acceptance is.the manifestation by the offeree of his agsent.to the terms of the offer. Without acceptance, there can be no meeting of the minds between the parties. (Art. 1305.) Acceptance of offer must be absolute. ‘The acceptance of an offer must be absolute or tmquali- d, that is, it must be identical in all respects with that of the ffer so as to produce consent or meeting of the minds. If the acceptance is qualified, as when it is subjectto a condition, it constitutes a counter-offer which, in law, is considered a rejection of the original “offer and analtemptby the partes to enter into a contract on a different basis. (Logan vs. Phil. Acetylene Co., 33 Phil. 177.) ‘A qualified acceptance must, in tur, be accepted abso- lutely in order that there will bea contract. Scanned with CamScanner i |WONOBUIGATIONSAND A THELAN CONTRACTS Tn, m0 cation: “Will you bUY My (specify veers "Ves, L Accept YOU gffee™ the azeplanc of B sa ie to pay only 160,000.00 for the ea, other {arora land of for P200,00.9) °° ied and Becomes a COUNtCE-Offe. In ys oferer and 5, who was the origina? nr, 1900, An aceptance may be express cor implied. (9) Form of acceptance of offer. vam expres acceptance may be ofal Or wetlen. An im, sed seceprance sone that i inferred From CT OF conduc, pr ithas been held that wherea person accepts the services ‘ofanother, whether solicited or not, he has the obligation tp ay the reasonable valu of the services thus rendered upon Fe plied contractoflease of service unless itis shown that the service was rendered gratuitously (Perez vs. Pomar, 2 Phil 682) or without any expectation that he would pay for the same. (Aldaba vs. Court of ‘Appeals, 27 SCRA 263.) 'ART, 1321. The person making the offer may {ix the time, place, and the manner of acceptance, all of which must be complied with. (n) Matters that may be fixed by the offerer. "The person making the offer may prescribe the time, theplace,and the manner of acceptance, all of which must be complied with. Ain acceptance departing from the terms of the offer constitutes a counter-offer. Take note that a counter-offer has the effect of extinguishing the offer. It, in effect, constitutes a new offer which the original offerer may accept or reject. ’ isk SE js "IA 0 comagey coe CONTRACTS Articles 1321 to hay ve can law. (Report of the Code a ‘adopted from the Ameri mission, p.135,) EXAMPLE: communication of acceptance to agent. By legal fiction, an agent is considered an extension of she personality of his principal (An 191m y guthorized, the act of theagentis, inlaw, theetot tee pal. , Article 1322 applies only if the offer is made t the agent and the acceptance is communicated eect him. Hence, there would be no meeting of the minds if the principal himself made the offer and the acceptance communicated to the agent unless, of course, the latter is ‘authorized to receive the acceptance, ART. 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, orinsot of either party before acceptance is cool (n) When offer becomes ineffective. € «An offer may be withdraiin before itis accepted. After acceptance, the contract is already perfected. (Art 1319) Under Article 1323, evenif the offer is not withdrawn, its acceptance will not produce a meeting of the minds in case the offer has already become ineffective because of the iad eee Scanned with CamScannerJONS AND Jon OBLIGATI an oe THELAW OF TRACTS Tay ction, insani ac a t., death bition eptance of the offer. Ing ee ean ea eersto“ether party” This meat ‘peobserved arp ceeptance is communicated, both ates datum eae belvingand capactated, eg offerer and oF 7 tL. 1327) other grounds which render offer ive. : : eae sunds are not exclusive. Thus, failure The abort Fondition of the offer as go the time, plage comply Win of payment (Art, 1321.) the expiration gp an the matted in the offer for acceptance (Art. 1324 Be the period te thing due before acceptance (Art, 136°) offecon the offer etc, will also render the offer ineffectiy re and prevent the creation of a contract. 4, When the offerer has allowed the dolancerh 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. (n) Meaning of contract of option; option period; option money. (1) Option contract is.one giving a person for a consideration a certain period within which to accept the offerer Itis 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 toaccept an offer within a certain period. (2)- Option period is the period given within which the offere must accep the offer @) paid in with ea Option money is the money paid or promised to be consideration for the option: It is not to be confused imest money whichis actually a partial payment of the > mt. ESSENTIAL pel EQUISTES op, Consent” CONTRACTS a purchase price and isc si pf the contract. See Art, 1499)" #8 Poot ofthe perfection jthdrawal of offer Where.» Wii tipulated for acceptaretiod When the offerer gi : within which to accept the f° He offetce a certain \¢ offer, offer may be withdrawn, asamatene eel rule is that the EXAMPLE: X offer to construc rica Priamep eet Vora grief PL. a latter 10 days within which Under Article 1824, x ma | X may withdraw the offer eve cer ahersPet O10 days unless Vhaalady seston offer. Ate aceptance, withdrawal nate no more offer to withdraw, St POe a cance en before acceptance, X may not withdrave the offer if the option i covered by a considerations shen Yd or promised to pay a sum of money toX forgiving hot ne 10-day period. There ishere an option contraes Ate the te day period, in the absence of acceptance, the fer ecg ineffective. Articles 1324 and 1479 compared. Article 1324 lays down the general rile regarding offer and acceptance. It has been interpreted as modified by the provision of Article 1479* of the Civil Code which applies specifically to “a promise to buy or sell” &: “Ar 1479. A promis tobuy ad sla determinate hig fo apc ean is reciprocally demandable. % ‘An accepted unter promises buy oto sla determinate hing for apsce ‘certain isbinding upon he promisarftke prenseissupported by acansidestion Aistint fom the price. (15a) { Scanned with CamScannerJ OBLIGATIONS AND , THEN Ns Atay M _ ll a determiy somise to buy or sell inate th; A consideration distinct fom the pi ot SUPPOMES Thing was intended to be sold by or xy gf for which a idoes not bind the promisor (offere,), promisee (o be withdrawn at any time. (see! Southern i .dmay’ i ifacepted, and m2“. atlantic Gulf Pacific & Com, os et § MD ys. JM. Tuazon & Co., Inc, 78 sc, 33) EXAMPLE: : ’ ,nthepreeding ample, suppose the offer, popes ‘of Y, giving the latter 10 days within whe toaccept the offer. Inthiscase,Xmay withdraw his offer a anytime, even afer septa by WY hast pal or promise apy pcideraton 0X forgiving him (the 0-day period wats which to make up his mind. ART. 1325. Unless it appears otherwise, “business advertisements of things for sale are not definite offers, but mere invitations to make an offer. (n) Business advertisements generally not definite offers. Business advertisements of things forsale arenot definite offers acceptance of which will perfect a contract but are ‘merely invitations tothe reader to make an offer. Howey theadvertisement is complete in all the particulars necessa ina contract, it may amount to a definite offer which, if : luce a perfected contract. : (“For sale: 200 Square meters lot at G i ~ Village, Quezon City for 1,000,000.00 eee Trsbnote cote a 00 — Tel No. 844-1284. 2) “For sile: 200 square meters lot i : tat Green Vilage, Quezon City located atthe comer of Geeine wad 27 ‘ESSENTIAL as te LREQUISTES : OF cove Consent 315, Magallanes Steet for This sa definite of, 0000cash. Ta No, gas tay ART. 1926. Advert simply invitations to men for bidders are advertiser is not bound to age nosa'®: and the lowest bidder, unless he contrary apna 7 (0 advertisements for bida not definite otters, Inan advertisement for bi the one making the offer fn male adenine i making the offer which the advertier a hee gone or reject. Acceptance by the advertiser of a vivon trae necessary for a contract toexist between the advertiser and the bidder, regardless ofthe termsandconditineothicens (Surigao Mineral Reservation Board vs, Cloribel, 4 SCRA oS) ‘ lers generally Asa general rule, the advertiser is not bound to a: the highest bidder (as i tobuyhor he Beet when the offers to we bidder (as when the offer is to construct ee) ie the contrary appears, Injucical sales (ie, sales ordered by a court), however, the sherif or auctioneers bound to accept the highest bid. (see Rules of Court, Rule 39, Sec. 19.) ART. 1327. The following cannot give consent toa contract: (1) Unemancipated minors; (2) Insane or demented persons, and deat mutes who do not know how to write. (1263a) Capacity to give consent presumed. The Civil Code does not define who have capaci defines on the contrary who have no capacity, by which it canbe inferred that capacity is the general rule, which exists in those, of whom the law has not denied it (8 Manresa 658; a Scanned with CamScannerJON OBLIGATIONS AND THE LAW ON TRACTS AR .1Co.vs- Arenas, 19 Phil. 363.) The by, sien ‘Who asserts incapacity. den of proofs 6 10 cannot give consent. rere into where one ofthe parties sn toa contract is voidable. A voigay. ing until itis annulled by a prop, le tible of ratification. (Art. 1399)" persons Wh ‘Acontract em! of giving om mea valid and bindit serion in cout [ts sUsceP Those who are incapacitated to give consent unde, “Article 1327 are’ the following (1) Unenancipated minors. They refer to those ve i ave not yet reached the age of majority (g ears) and ae still subject t© parental authority. A mingp a ‘be emancipated by atl jnment of the age of majority, by can gory the concession recorded inthe Civil Register, er or oftemother whoexerciss parental authority fee Art. 254, Family Code); (0) Insane or demented persons. — The insanity must xs atthe time of conlacting. Unless proved otherwise, a person is presumed sane; and (@)_Deaf-mutes. ~ They are persons who are deaf and dumb, However, if the deaf-mute knows how to write, the ontractis valid for then he is capable of giving intelligent consent. Aperson who does not know how to write, does not, know how to read; and one who knows how to read neces- sarily knows how to write. A contract entered into by a deaf- knows how to read is, therefore, valid, although ae of some physical reasons. Reason for disqualification. __. The reason behind Article 1327 is that those persons mentioned can easily be the victims of fraud as they are not ‘capable of understanding or knowing the nature or import oftheir actions, They can enter into a contract only through a parent or guardian. ts R81 Be NTIALREQUISTES oF co Consent ONTRACTS 37 ART. 1328. Contr tei interval are valid. Cy erred into during a state of drunkenness or during a pees (2 in 8 are voidable, (n) 19 @ hypnotic spell contracts entered into 4 si a lucid interval, "? Effect of drunkenness and hypnotic spell. Drunkenness and hypnotic s ; ss pel impair the capacity of a person to give inteligent consent. (@ Manresa és 651) ‘These conditions are equivalent to temporary insanity. Hence, the law considers a contract entered into ina state of drunkenness, or during a hypnoticspell voidable and it isnot required that such state was procured by the circumvention of the other party. # ART, 1929. The incapacity declared in article 1927 is subjectto the modifications determined by law, and is understood tobe without prejudice te special disqualifications established inthe laws. (1264) Incapacity declared in Article 1327, subject to modifications. “ In general, the contracts entered into by the persons enumerated in Article 1327 are voidable. (Art. 1390. ) However, in certain cases, their incapacity may be modified by law, that is, they can also give valid consent. Thus: (1) When necessaries suchas food, delivered to a minor or other person without capacity to are’sold’and” ao” Ceaseniatia: seo ae | \ \ Scanned with CamScannerFON OBLIGATIONS AND sue LawoNcaucnn s ms les “Be ible price therefor. ( ac, he must pay a reasonable P APS. 15g 290) nor 18 years old or above may con) Cy A mine jntinsrance, provides the ingurg ° Iie, healt ar vand the beneficiary appointed isthe mince > taken on is Hors father, mother, husband, wife ‘ors vor the © Code of 1978 [Pres esate of sane Cn of 178 [Ps Decent 3 pac3) mae ntact is valid if entered into throu, suardian or legal representative. (see Art. 1381/1, 2], , (a) A contract is v: sented his age and conv believe in his legal capacit 215.) (6) Acontractis valid where a minor between 19" years of age voluntarily pays a sum of money oF deliver, Tangible thang in fulfillment of his obligation therrundey and the obligee has spent or consumed it in poe faith, (gy 47) Other special disqualifications may be provided by law. In addition to the incapacity declares! in Article 1329, other special disqualifications may be provided by Law (1) Under the Rules of Court, the following are oon. sidered incompetents and may be placed undes guardian. ship: ‘persons suffering the acorssory pensity civil inter (see Art. 34, Revised Penal Code ) (©) hospitalized lepers; (0) _ prodigals (spendthrifts); gh a ib where the miNOF misreprg, ingly led the other party ty fercado vs. Espiritu, 37 Pag Lier Arde 25 of he Femdy Cade asamendes by RA.No. #808, “unkns Provide, majrty commences a the age of 18 years” ‘ ~ eos CONTRACS aw (@) deat ang awrite: amb who are ‘Unable to read and (©) those wh, they have lucid interval meound mind even though (9) those who, fy by reas mind and ober sinensis aid, take re of themselves am without outside becoming thereby a 'tanage their property, ting th easy prey for ee tion. (See. 2, Rule 9, Rueorcaresst and exploita- ct entered into by. weak th valid ‘son of incapacity under 8 which vitiate consent emnPetent has been placed under alts presumed tohave capacity to enter into a contract, (a) insolvents until dischar UAet No, 1956, a8 amended) Sec ty noNeREY Ea 0) ) married women - married won "Min cases specified by law (Art. (c) husband and wife with respect to sale of property to each other (Art, 1490); and (i) other persons especially disqualified by law, (see Arts, 1491, 1789.) +k ART. 1330. A contract where consentis given through mistake, violence, intimidation, undue Influence, or fraud is voldable, (1265a) Characteristics of consent. wo In order that consent may be sufficient for purposes of contract, it is required, not only thatit exists, but that it must be given with exact notion over the thing consented to. (see 8 Manresa 663,) There is no valid consent unless: @ tt 1327-1329.); intelligent. — there is capacity to act (see Arts. Scanned with CamScannerOBLIGATIONS AND ‘o THELAW ON ACTS Any, — there is no «fee and voluntary. — there Viti 2), It's fee ence or intimidation (see Ar consentby feason of md, taneous. — there is n usor spon 0 Vit @) lis si stake, undue influence, or fran JE consent by #8 ; oreo tile 1990 enumerates in a Negative map . The contractiy T juisites of consent. ’ Ng Parti, ihe sites the srcessary legal capacity. (Arig SS mus 1329.) Vices of consent. “Aside from incapacity and simulation of contract, side ie the causes that vitiate consent or rend, © (1) erroror mistake (Art. 1331.); V2). violence or force (Art. 1335,); {_@) intimidation or threat or duress (Ibid); (4) undue influence (Art. 1337.); and ¢ ©) fraud or deceit. (Ar 1338.) lation, ‘gat ler it Causes vitiating consent and causes of incapacity distinguished. (1) The former are temporary, while the latter are more or less permanent; and (2) The first refers to the contract itself, while the second, to the person entering into the contract. Both make a contract “voidable” only (see Art. 1390), not voic 4 ART. 1331. In order that mistake may invali- date 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 one of the parties wiy such identity of quatigay cipal Cause Of the contrat” A simple mistake ot », to its correction, (t26e9) 8CCount shall give rise meaning of mistake or erroy Mistake or error is the fal material to the contract, Hse notion of a thing or a fact Nature of mistake, (1) Mistake may be of fact 41334), the mistake to which Article 1351 i fact. It may arise from ignorance or lack, fmol : (2) The mistake contemplated by law is substantial { mistake of fact, that is, the § party would not have gi consent had he known of the mistake Hee Sa cyes mistake will vitiate consent and make a contract ‘or of law. In general (see Art. | not every voidable, Mistake of fact to which law refers, In order that mistake may vitiate consent, it must refer i oe q (1) _ the substance of the thing whichis the object of the j contract; or (2). those conditions which have principally moved cone or both parties to enter into the contract; or (3) the identity or qualifications of one of the parties provided the same was the principal cause of the contract. 1 No. 1 above iinludes mistake regarding the nature of the contract, as when the contracting parties believe that the other is selling, when in truth and in fact, both are buying. (see Madrigal & Co. vs, Stevenson & Co, 15 Phil. 38.) Scanned with CamScanner| oNOBUGATIONS AND THELAW OF TRACTS At) e consent vite cone rst incites of tNNE Or aden (i) Barone cesibilty of a residential hoyce thereat 6 ry maximum speed of 2 car not anspor atone he contact doesnot vit sl be 31, pat.) unless f erroris caused by frayg party. Gee Art. 13383 te oe to quantity or amount does not a ves rise tits correction (Ibid, pay the contract. : to 1) Mistake as 10 4 - ‘consent but only Bi ce of | scat goosto the essence of th le ards the motives of the contract (gg Error as regards t ee ot ale itt consent ules the motives Ae conn or cause ofthe contract. i), Mitkeasrogads the ently quaifeatins of forthe reason that contracisare not vitiate consent: ar ore in consideration of the things Or Services es orm their subject matter rather than of persons. The exception is when such identity or qualifications have been the rina cause of the contract (Art, 1331, par. 2), ag ‘bjectof the contract, it sto be assu fk alecting gt ake chances and cannot, therefor that oe a a Martinez vs. Court of Appeals, 55 SCR, (se a cal true where the contract is aleatory in ature ee ind from S wh B bought a parcel of land from $ who informed him before the contract was perfected thatthe land was involved ina itgation in which Cis the claimant. {In ease the land is recovered later on by C, B cannot allege mistake in his contract because he knew the risk that the land might later on be recovered by C. ART. 1334, Mutual error as to the legal effect of an agreement when the real purpose of the parties is frustrated, may vitiate consent. (n) Meaning of mistake of law. ‘Mistake of law is that which arises from an ignorance of __ someprovision of law, or from an erroneous interpretation of TD ty nao he proach ‘ottoman arose etonintvirteskerah iowatelpecgenertnurtin otto tan indeterminate time, (17%0a) Fe eg a meaning, oF f0m an erson 201 datect of an agreement, on the nos o™lusion as to the. legal % Patt of one of th A part Effect of mistake of lay, oom As a rule, mistake of lay A ecause “ignorance ofthe lay ae jivalidate consent ce therewith.” (Art. 3) This doctrine ae from compli- policy, dictated by expediency and neces om Public Pinatoc, 74 Phil. 15.) sity. (See Luna vs, when mistake of law vtates consent “Mistake of law does not : hen there isa mistake ona dj the construction or applicati a mistake of fact, and the m: Sensat (ignorance of the la ‘no proper application, Benerally vitiate consent. But ‘oubtful question of aw, or on ion of law, this is analogous to 'axim of ignorant legis neminem 'W excuses no one) should have When even the highest courts are sometimes divided upon difficult legal questions and when one-half of the lawyers in all controversies on a legal question are wrony why should a layman be held accountable for his honest mistake on a doubtful legal issue?" (Report of the Code Commission, p. 130; see Art, 1331.) Requisites for the application of Article 1334. For the article to apply, the following requisites must be present: (1) The error must be mutual; (2) It must be as to the legal effect of an agreement; and Q) It must frustrate the real purpose of the parties. EXAMPLES: (1) Dborrows P10,000.00 from C. As security forthe debt, it was agreed that D should mortgage his parcel ofland Scanned with CamScanner tee 1jowever the document 25 witten is i : ‘a ee i eon nth c(t 1998, pat. 2) nasa butte sa mee tet inetion. In this case, the: / who Pats loan commodatum) (se Art. 1316) the nature of ety as tre isn a depesit nora ean ‘We ART. 1335. to wrest consent, serious 0 There is violence when in order r irresistible force Is ‘employed. is intimidation when one of the Ther 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 the intimidation, the age, sex and condition of the person shall be borne in mind, A threat to enforce one’s claim through com- petent authority, if the claim is just or legal, does not vitiate consent. (1267a) See cent nese ge septic mm cts ere ett en Specwtoreee see es oN OBLIGATIONS AND THELAW OS NTRACTS Arta 6 Hows eorousy beeing hatha tract is voidable Because there m0 "example, ifthe parties realy heen arin discloses a mone fie minds but the document dog remedy is reformation. (ee Art. 1339) delivers as a deposit a movable property g 7 pe mutual ero snot on the legal eft buy Here te contact entered into. D must return the ESSENTIAL ey 1385 QUISTES o a Consent CONTRACTS a ture of Violence or foreg Violence 1091s the or iployme ger Article 1335, to mal of physical fo unefoyed must be cher ae dete, the force Loy" emp = ious or irresist ee consent i Nt fe. (Repent 9 ost In ether ‘ode Commission, P 136) EXAMPLE: FX signs a document shit by the but ofa pun wage eye ese his head, thereis violence becausecene oo 9 How from is employed to wrest consent, ious or irresistible force In this case, X is “mere autor cally ony ‘ile hishand sige cn —wrcemerss another's While contac ma ene ee ‘made, ithas in reality and in inw only one party toi and there ein nay Se one using the force or intimidation, it unenloreable for Tack of a Second party” (Vales va ita 28 at see Nature of intimidation or threat, Under the above article, for intimidation to vitiate the consent of aparty toa 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) Theevil must be upon his persor or property or that of his spouse, descendants, or ascendants; and (4) Itis the reason why he enters into the contract. Intimidation need not resort to physical force. Intimida- tion is internal while violence is external. EXAMPLE: In the preceding example, because a gun is pointed at him by ¥ wl if X signs the document ho threatens to kill Sea Scanned with CamScannerGN OBLIGATIONS AND . ELAN ON ae ontobelieve that Y Will not and he as 0 on would vtiate conseng, "Yow intimidated that he would hy mero gunat the time of the trey gt ryand thea as contemplated in Article 1335 tee is imi orale and ver grounded since ae ioe tis threat. fon tcarty Ou est gn the contact BEE OF a thre Suppose Mp the ie of his he) brother or gay® is a tet intimidation just the same onside would tet the a? (Pat. 2) Ifthe consent of sume sae said a the threat maa wie tointimidation tors to determine degree of intimidation. ble and ether of not the fear is reasonable and yey, eerste evilimminent and grave depends upon ty grountances, including the age, sex, and condition ofthe person. Ifa contractissigned merely out of reverential fear or the fear of displeasing a person to whom respect and obedience fearon te contract is valid because reverential fear by itself does not annul consent in the absence of actual threat (Gabalvaro vs. Eslanger and Galinger, 64 Phil. 588.), unless the fear so deprives one of reasonable inference that undue influence has been exercised. (see Art. 1337.) Fat Threat to enforce just or legal claim. ‘The threat ofa court action as a means to enforce a just or legal aim is justified and does not vitiate consent. Itisa practice followed by creditors to demand payment oftheir accounts with the threat that upon failure to do's, an action would be instituted in court. Such a threat is proper ‘within the realm ofthe law as a means to enforce collection. Such threat cannot constitute duress even ifthe claim proves, S617 SENT Consent CONTRACTS Po ded s0 long as th ynfoun le cred Night to do so. (E. Berg vy, NCBNY. Tilers that it was his EXAMPLES: “AD Phil 308) (1) Dowescps, ; 00.0. threat by Cthat he would enjoy hisbligation dction dos noite ton gh rt Butif Cknows tha 5,000 ora larger sins gatimidation suche mut beCaus ofthe treat thes @) Xeonmites eos report Xto the pou eaten o The threat of Y amou claim is not “just or legal” ART. 1336. Violence or intimi annul the obligation, although itmay been employed by a third person who did nat take nat in the contract. (1268) NS to intimidation because his Violence or intimidation by a third person, Violence or intimidation may be employed son who did not take part in the contact Hoverento nake the contract voidable orannullabl it isnecessary that the violence or intimidation must be ofthe character required. in Article 1335. ART. 1337. There is undue influence when ‘son 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 confiden- tial, 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 stress. (n) Scanned with CamScannerJON OBLIGATIONS AND x0 THELAN CONTRACTS AR tay influence. ing of undue ; moore is influence of a kind that so oy, * undue influence nal ' " tty as to destroy his free wi seers the mind of 2 aU 2 er rather than his ga vm : the wi rake him exPre peza, 42 Pil 596) (Cove vs Fem pe unducor improper (Art. 13 nfluence must be une 37) ; eee coe general or reasonable influence eh avrfcient. If gained by Kindness and affection or argumeny sufficient. will not vitiate consent, (big sion, the influence sod one “and Shanghai Bank, 15 Phil. 252)" Circumstances to be considered. ‘the following ae'examples of circumstances which shall be considered to determine whether undue influence hhas been exercised: (1). confidential, family, between the parties, (2) mental weakness, spiritual and other relations @)_ ignorance, or (4) financial dstessof the person alleged to havebeen unduly influenced. (Art. 1337; see Art 1332.) EXAMPLE: a tenant, isin need of 1,000.00 to pay his landlord who is seeking to eject him for failure to pay the rents. X tries to borrow from Y but the latter instead tells him to sell his piano for P1,000.00. X has nobody to turn to for assis- tance. EX does not want o sell the piano but he is compelled to sell it because of his financial condition, the sale may be avoided on the ground of undue influence. “Agreements between lender and borrower are closely scrutinized because they are not alway’ at arm’s length.” (13, Cy.410) 38 ESSENTIAL REQUisTES Consent CONTRACTS at a ART. 1338. There j is fraud insidious Words oF mach ad MEN, thro Gontracting Partie, the etngr ions, o! one tthe ato 2 cOntaCt Which, thot pee ter have agreed to. (1269) would not reaning of causal fraud, Causa frauds the fraud comma ; rm axthe time ofthe celebration ttn arg ey ene gent of the other, Its the fraud used bn neo Seeure the ‘other to enter into a contract withore sin 19 induce Ue ald not have agreed to, tout which the later ‘The fraud contemplatedin thisat e . ‘in this article is causal fr anust be distinguished from the ada au fraud deat with in Artie How causal fraud committed, Causal fraud may be it “nner ented hough nin 1339, “Insidious words or machinations” cmeeae purpose If the fraud did not have the eff ig it did not by itself alone cause the eae togive his consent, it gives riseonly toan action for damages. (ee Art. 1344, par. 2.) or Requisites of causal fraud. In order that fraud may annul consent, the following requisites must be present: (1) There must be misrepresentation or concealment (Arts. 1338, 1339.); (2). It must be serious (Art. 1344); @)__It must have been emplayed by only one of the contracting parties. (id) Fraud committed y third person Goes not vidiate consent unlessit was practiced in connivance Scanned with CamScanner j i ae| [ON OBLIGATIONS AND THELAN CONTRACTS Any vith, orat least with the sanowledge of the f2¥0rEd con with My (sce Art. 1342) ; " ing ba y itmust be made in bad faith or with intent to n a Art, 1343.) the ‘other contracting party who hag.” me ithe fraud? a Knowledge © ; sie must Rave Inauced te consent OF the oye contracting party (Art. 1338) and {6)_ It must be alleged and proved by clear ane coy, vincing evidence. EXAMPLES: 1 Soffered to sell to Baring, clain sath dimond 5 knows Hot ordinary glass ob tion of, @ same was” gave his conse Sale was registered, it was annotated on the title of the The concealment constitutes traud such a» justifies the avoidance ofthe sale, and entitles B to damages G) Ssold to Ba house and lot, misrepresenting that theplace was aressible to means of transpotstion. These is voidable on the ground of fraud if B was induced to give his consent because of the representation, But ifB purchased the property without any inducement from B, his mistaken belief that it was accessible does not vitiate consent because the eror refers merely ton incidental quality or condition of the thing. (see Art. 1331.) that thes tne wt diamond bey ring relying on the trath of the represen ‘pe annulled on the ground of freug. yst sale may § sold to Ba parcel of land representing that solute free of al Hers and fencumbvances=¢ oon the faith of B's representation. When Jound that lis pendens notice wee ART. 1339, Failure to disclose facts, when there is a duty to reveal them, as when the parties are bound by confidential relations, constitutes fraud. (n) x aud by concealment "A neglect or failure to ¢ goa contract Knows and Ought eee that Which set T Nase, og tes entation, (sce Insurance valent to mi eho, See- 26.) Code of1978 [Pres Decteeh, ‘The injured party is en tract whether the failure eo 8 ‘tensional OF unintention; ieffor them and the party smi ety the contract. I the failure i unintce ims action for annulment isnot fraud bey (art. 1543.); even if intentional but there is noah the disclosure, the partes are bound by then ca isit the basis of ake or error luty to make contract. EXAMPLES: (Dy X and Y are partners engaged i business. Her thepatstar bound ene Xeamed that C was interested inbupingeeng iand owned by the partershipevenforahigh ore Wns ileming tesa trey iim isan in the partnership, Then, X so ra inher Te Xl ei pt n this case, X is guilty of fraudulent concealmes use he wa under the duty to make ditclosue af ae 1 bearing on the value of the interests of Y in the pap ih ew town Ge 5) If the sale was a the iiiative of, and X uintention- ally failed to inform Y of C's ofr, the cause for annulment is mistake or error onthe pattof¥. (2) Ssold toB stockstradedinthestackexchangeata certain price. Sboieved that the price of he stocks would go Gown and it dd, The sales valid because S was not bound to make disclosure of his reasons for hs belie. be ART, 1340. The usual exaggerations in trade, when the other party had an opportunity to know the facts, are not in themselves fraudulent. (n) side Scanned with CamScanner2 He cryudgment. AnY person who wl er oat hiso8N Perl (see Song ON OBLIGATIONS AND st THELAW CGN TRACTS Anaay yee SETI AEQUS op Cones OF CONTRACTS intrade. se eT ane for merchants and expression of opinion, = It is the natural ted ea ee mand 2d, eae ee to rexort 10 exaggeF en the person dealing vet stat no pion. Oa Pon the highest Pee Pty o know the facts, the use tith opinion does not signify fraud, La mere expression bd them had an oppor not in themselves fraudulent & Pefraud, the following rea Order that it may amouct trade are selves hon ‘s agg eae ate 0