racui WARING t| ter the bank wee said bank became articular case the contract created, Ong’s offer is to perfect The peculiar stacle to his lusion of the of his offer. turned from his bid that aced under 1 1985 after 10t operate Id involve vs pesseesnnns CULUMTHY, he _ ~~ not reach the stage bank approving his bid a voke the resolution of the disputed properties, i paid or promised. (n) An option is a contract granting a privilege to buy or sell at a determined price within an agreed time.* In Ang Yu Asuncion. v. Court of Appeals,” the Supreme Court summarized the rules in case the offerer has allowed the offeree a certain period, otherwise known as an option period, to accept the offer, to wit: (1) If the period is not itself founded upon or supported by a consideration, the offeror is still free and has the right to withdraw the offer before its acceptance, or, if an acceptance has been made, before the offeror’s coming to know of such fact, by communicating that withdrawal to the offeree (See Art. 1324, f 26Spouses Buot v. Court of Appeals, G.R. No. 119679, May 18, 2001; Laforteza ‘AD 798. v. Machuea, G.R. No. 137552, June 16, 2000, 127 SC. 2G.R. No. 109125, December 2, 1994, 57 SCAD 163, 238 SCRA 602.JBLIGATIONS AND CONTRACTS Ant 1324 oud OLIGETEXT AND CASES. ion ofthe ese to sll constructed and! te his option to buy so of night ad with Dorcel his due, and observe period stipulated. Consideration in an option contract a may be anything of value, unlike in sale where it must be the price certain in money or its equivalent.” ‘An option money in an option contract must be diferentiated sect, The sneer, hove, rede Meat from an earnest money. Earnest money is considered part of the should be taken ofthe real nature of the consideration given, for price in a contract of sale and canbe a prot ofthe perfection of the iin contract of sale.” However, itis not the giving of the earnest money per se, but the proof ofthe concurrence ofall the essential elements ‘of the contract of sale which establishes the existence of a perfected deposit” should be made by the seller merely to guarantee that the In Serra v. Court of Appeals, the Supreme Court had the buyer will not back out from the sale, such earnest deposit is not occasion to briefly discuss what an “option” contract founded on a earnest money that can be considered as proof of the perfection of separate consideration involves, thus: the contract. Jurisprudence has taught us that an optional contract is a ‘Upon the expiration of the option period and the person given privilege existing only in one party —the buyer. For a separate ‘such option does not manifest his or her acceptance, the offeror may consideration paid, he is given the right to decide to purchase offer the intended contract to somebody else. Any contract perfected or not, # certain merchandise or property, at any time within the agreed period, ata fixed price. This being his prerogative, hho may not be compelled to exercise the option to buy before the time expires. "San Miguel Properties Philippines, Ine, Huang, GR, No, 187290, July 32, Saeed 2000, 130 SCAD 713, 398 SCRA 787 ™G R, No. 103838, January 4, 1994, 47 SCAD 65, 29 SCRA 60, See also Adelfe article 1482 ofthe Givil Code. ‘Propet: Ine. Court of Appeals, GR, No. 111288, January 25, 1995, 68 SCAD *1gan Miguel Propertos Philippines, nev. Huang, sera, 4 1,OBLIGATIONS AND CONTRACTS Arts. 1826-1597 2. "TEXT AND CASES swith such other person shall be considered to have been done in goog faith. “Article 1925, Unless It appears otherwise, business adver. tlsement of things for sale are not definite offers, but mere invita, tons to make an offer. (1) Generally, advertisemé tions to make an offer. Thus, sell his house to any willing ic chaser to make an offer or to ne uy. the house. The offer ofthe purch: essential requirements to make h of the house. The phrase “unl pears otherwise” connotes that the advertisement may constitute an offer which is certain, Article 1326. Advertisements for bidders are simply invita. tions to make proposals, and the advertiser is not bound to accept the highest or lowest bidder, unless the contrary appears. (n) ‘A person who entertains an advertisement to bid does not Davies, Inc. v. Court of Appet ‘a company starts the process of a bidding and disseminates the document denominated the “Terms Conditions of the Bidding” to the bidders, the dissemination of “advertisement” to bid in the p submitted by the prospective suppliers are the offers, The favorable reply of the company to one of the prospective suppliers is the acceptance, Article 1827. 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. (1263a) “Limaon v. Cour of Appeals, G.R. Ne. 195029, Ay 0.195929, April 0, 2001, 147 SCAD 881. “OR, No, 128066, June 1, 2000, 120 SCAD 20, 333 SCRA 684, minor. Also, when pacity of one of the parties, to make any restitution excep the thing oF price In Braganza v. De Villa Abrille" where two minors signed a promissory note, without telling the creditor their ages, and where the debtor sought to enforce the promissory note against them, the Supreme Cou their ages cannot be absolved from the contract they entered into, Pertinently, the Supreme Court said in the Braganza case: Executive Order No, 209 as amended which ook eat on August 3 1988, “GR. No. 11872, Decemta (TONS AND CONTRACTS Ar toa7 oma aS lore, failure ta disclose their minority sexx From the min abe .n Jurisprudence, decision under review is the very minors from contracting should likewise exempt them from the reeults of misrepresentation. We hold, at this point, thet being minors, Rodolfo and Guillermo Branganca could not be legally bound by their tures in Exhibit A. of majority in invoke it because more than 4 years had el become emancipated upon rea provisions of Article 1201 of effect that “an action to anni Code are quoted to the by reason of minority wat MT ser SM 7 "8 OF coNTACTS ‘Sectn 1 Cases from Ox Furthermore, ther is reason to wane the 4-year period fixed by Art Contracts entered into by insane or demented likewise annullable. Such contracts are valid up to are rendered ineffective by the courts. They are not ‘The law therefore clearly presumes that the cont important to prove the insanity af the ater party Perfection of the contract. Persons slferng fom a mental incapacity toa gente less dogs may bo divided into thes class. They a: its Inti ad those wh ae nat lly tal incpactated but are mentally week An idiots oe who bas been insane fom Wirth A lumatie sone who was atone tie ene, but who fomPe tlof ime when an insane person acta Prehension a ine Heeeretenion and dncerament ito, w valid contract terval, Howe ind for the inthe absence of evidence showing fraud, duress or undue influence. Contracts entered into in a state of drunkenness be annulled. However, the intoxication must be of 2 as to perpetuate an undue advantage over the drunk Moreover the insanity alleged must have a direct bearing complete as 9 Contracts entered into by Aeprive the party of his reason ofan agreing mind to write is also annullable, The law alone is not enough to make the contract the success accomplished by modern m¢ (OBLIGATIONS AND CONTRACTS ans has CATT AND CASES being a deaf-mute le. This is so because in instructing those while in such a condition voideble unless procured under such circumstances as to justify the inference that it was obtained by fraud or circumvention. Intoxeaton which merely the party from giving proper attention to whet ho ‘or from fully realizing the nature of his acts is ‘to invalidate a contract, Mere intoxeation unmixed any inequitable conduct on the part of the other party to the F. Blt, Commentaries on the Law of Contracts, Volum —— ndinapi Te Bob Merit Company, Paes 460-40. Supra, Pages 815-578. Page 1d, Pages 650.651.OmLsOATIONS ANDCONTRACTS Arts 1320355, “ ‘TERT AND CASES 'A contract entered into during a hypnotic spell is likew; hide cee ed suggestibility and continued hypnotist. reaponsiveness to the voice Article 1329, The Incapacity declared in Article 1327 Is subject to the modifications determined by law, and is understood to be laws. (1264) Article 1330. A contract where consent is given through ‘mistake, violence, intimidation, undue influence, or fraud is woidable. (12654) To create a contract, the meeting of the mind must be free, vo u illful and with a reasonable understanding of the various obligations the parties intend to be bound, Mistake, violence, , undue influence and fraud as grounds to annul a contract through fear which deprives him of self Sra Pas 8-6, sid Poe 68058 “The New Lexicon: Webeter's Dictionat Rdition, Lexicon . Inc., New York, page 477, Sta san Mutsy 260 te ity oc : © tenteeo part it onto tn ens fo oe ‘have been the principal cause of the contract, walieations A sino mitts oon (12660) OF " shall give rise to its correction, {tis also clear in the law of contracts that — 4 unilateral mistake in the making of an agreement, of which the other party is entiruly ignorant and to which he in no way contributes, will not affect the agreement or afford ground fori Avoidance o rescission, unlessit is sucha mistake a gee ta the substance ofthe agreement itelt®™ HT Am Jur 24 604, cing Or 109,218, P787, 214 P 348; orringev. Reed, 116 Kans 874, 226 ‘De Leon v. Court of Appeal, "Sherwood v. Walker, 66 Mic, 888 Commentaries onthe Law of Contracts by Wiliam Flic, Volume Indianapolis, the Bobbe-Merll Compeny, Page 179, 47 Am Jur 24 493,“ntscations aND coNTRACTS ‘ny 38 "TENT AND CASES iat ae essen Theis v. Courg jych identity oF gui fold tothe bayee! Strack. In. Spouses Heinarch The ond opto ters he ert eed te ee ee eit eat ihe on poten nthe nee Mien where the mistake was no the flo the parang ‘was due to mistake in the survey made on the property, and where Sec so ng of immed red te Soe todter aeons lend or fondo money double the ae pair pony bt i fer ar cern ne Ibe buyor pring tu sl te or broposal become a por proposal selling parcel [No.4 tothe petitioner falls within the second type, Verily such mistake invalidated ite consent and as auch, anmuliment ofthe deed of sale is proper Mistake can also refer to those con; which have principally moved one or both parties to enter into the contract ria ‘Thus, ifA lent money to X only because he was informed that it was and the cause which cont the special request of Z to A, who owed Z a favor which A wanted te contract, the meoetingofthe mind reciprocate, and only because there was an apparent assurance from and with a reasonable understanding Z that he will bea solidary debtor; and X knew the parties assumed for themselves Wh forthe request of A and his engagement a siven through mite, ise pedgetin| eee or fraud, the contract is deemed voidable. loan would not have teen consummated an Bead, the cnt out that there was no request and no assurance coming from Z whe fesovetmenta in realty merely vouched forthe credit worthiness af & the Joan agreement can be annulled by A onthe ground that there was sven ttl, 100 i nr iat ite ay ‘an invalid consent as the condition which principally moved both of the thing whih'ig the upc ofa ‘those conditions which have prin istake. ‘or both parties to enter into the contract. Parties to enter into the contract wi ‘The law also provides that mistakes as to the identity or qualifications of one of the parties will vitiate consent only when "*Wlliara F.Elitt, Commentaries onthe Low of Corot by Volume 1, 1813, ‘tion, fndianapois, The Babs Meril Company. Page 17. OR, No, 174118, Apri 11, 2012, 668 SCRA 284 SOR No.1-126018, February 12,1997, 79 SCAD 434 “Tolentino, Cisil Code ofthe Philippines, p. 476, Vol. 4 (1902 Ba.)raxrioss ano CONTRACTS OPE AND CASES Mistake as tothe identity oF qualifcations of strip of land could be mis ill tate convent only when such the spouses Rubi werein ga ions have been the prinelpal never assorted possesion 4904 sale was made in th constructed the concrete fg sive ise to ‘fone ofthe parties to vitiate consent, two requisites must concur 1, the mistake must be either with regard to the ‘dontity or with rogard to the qualification of one of the ties and ty or qualifcation must have been the jn fr the eelobration ofthe contract residence over the subject lot a qual it tosall the act between the Church land Pante should be annulled. Tp the process of weighing the evidentiary value ofthese established facts, the courts should consider both the parties objectives and the subjective aspects of the transaction, parties circumstances their ‘The above facts, in our view, establish that there could one tributes and their cond the tract. These considerations fot have bona delterate will or duoc omnted wil show what inflence the alleged error exertcdon thea oes ante that misled the Church into giving its consent to the a eee sale ofthe subject lt in his favor. Tha ‘and ther intelligent, free, and voluntary consent tothe contra 8G Hs : ae ‘ceupant of the lot he purchased ws Contrary tothe Churehs contention, the actual occupancy or residency of a buyer over the land does not appear to be a tion that the Church requires before it could deed its policy, then neither Pante Rubi would oso by Pantes act; there had been no vitiationof the Churchs consent tothe eale of the lt to Pante, ‘A simple mistake of account shall give ise tits correction. A simple accounting error does not go into the essentials ofa contract. Article 1332. When one ofthe parties Is uneble to read, or t 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 thereot have been fully explained tothe former. (n) this regard that the lot was only a 2x16-meter strip of rural land used as a passageway from Pantes house to the municipal road, Weyx AND CONTRACTS Ang a onLicaTIONS 4NP CONT i ‘especially when there is proo ized to extricate part Cours are nt authored to exit 5 the langage in which the conn or fraud is alleged, the person enforcing the party interested in enfor Ee the contract must show that the terms thereof have been fully terme tharef ar fully understood by him, To tr mind hn wrdes ae anu : satisfactorily discharge. plained to the former. Before the benefits of Article 1982 can be availed of, the person invoking the same must first prove that he has the conditions described in Article 1382. Thus, if he is unable to read or In Lim v. Court of Appeales ial Partition written in English ell reversed the decision of the lower court and upheld the ruling of the Court of Appeals by explaining thus: burden of proof shift to the that the terms thereof have le to read or who does not understand the language of the contract. In Lustan v. Court of Appeals." where the dispute was whether or not the Deed of Definite Sale was in reality an equitable mortgage existing debt by way of mortgage, the Supreme Court ruled that the document was an equitable mortgage based on the clear evidence supporting such contract and based on the finding that the illiterate owner of the same was made to understand that the deed of sale Signed by her merely evidenced an indebtedness to the ereditor 10 voit: into being due tothe finding of still fanly large number of ‘and documents are usually drawn up in English or Spanish, [tis leo i the rights of those who are disadvantaged in life. In the petition in English, language ‘at bench, the questioned Deed is written in Engl ae ‘ot understood by the late Creseencia, an i ‘Tors v, Court of Appeals. No, 134 sca 94, 320 SCRA 428, an 1559, December 9, 1999, 117: 1, of Appeals, 0.8 No. 40145 July 29, 192, ee 16. 924, January 27, 1997, 78 SCAD 361, "G.R, No, 66201, February 3, 1994, 48 SCAD 28, 229 SCRA 6 seen Rocomusaxrions AND CONTRACTS oar AND CASES fow, will you tel the Court how the relation be, ea neta and your unele Lorenzo Tan before Seton of an illiterate was able to on the misrepresentation ‘The illiterate filed suit to recover his property alleging fraud and misrepresentation. The Supreme Court sustained the cause of the illiterate and said: inable to read and fraud is alleged, the ‘person enforcing the contract must show that the terms thereof ‘have been fully explained tothe former. ‘SG, No, 123490, August 9, 2000, 31 SCAD 463, 887 SCRA 464 oS ee cE ln ot Performing the contact and tions given to him by Bubs ts breach of Paragreph V Toners sales personel cntey othe writen antec sa er acto negigence,Acotres i bela hte the price, tnd hove who ae gly of pegigenc inthe permance thei eigatons are liable for damage “G.R. No, Toss, September 1L0xTIONs AND CONTRACTS: maT AND CASES In Lina Calicap-Asmeron vu. Development Bank of the «i, the Supreme Court rejected the Philippines, Article 1882, thus real estate proper shal re ‘The pertinent terms ofthe deed of conditional sale read: NOW THEREFORE for and in consideration of the foregoing premises and for the total sum of ONE HUNDRED FIFTY SEVEN THOUSAND PESOS (P157,000.00), Philippine Curreney, to be fully paid as hereinafter set forth, the VENDOR agrees to convey by Fight to reimbursement whataaever “G.R. No, 167380, November 23, 2011, 661 SCRA 64, mey7108 AND CONTRACTS Ar tg “wo OPC ATIET AND CASES 7 te ierby are sovnanted and stipulated wy ae iain orn ht es vege ezine is ie tater ya to pay the or See tr any ofthe tere ad coritions bein ead and the Vendeo' refsels to peacefully ate Sale full amount of the property covered by fand they tld me that afer ‘because I paid already he petitioner did not specify 55,500.00 tor the wets ‘deed of conditional sale she ‘hereby reveled washer distinct trite and spoken Bgl the lanes an tho contract she signed hed bea nae Cleary, Article 13920 the Co Coe doesnot apply tothe Court of Avy time you identified the ioned as Deed of Conditional of the Civil Code which provides: When one of the executed last January 21, parties is unable to read, o ifthe contract isin a in English language, correct? language not understood by him, and mistake or a you testify in this Court 1eed of interpreter? So, you are aware or comfortable with the English language? Yes, sir.ontroarions aco 1s 20 mistake If he party alleging it pnt 388 The oe Saat aan the stone he found sold it to a purchas they discussed their ignorance as to the q ne which they surmised to be probably a Top turned out to be a Diamond worth abo knowing the nat but which ev “17 Am Jur 24492, 05 NW. 42:64 Wis, 26, 1oNs AND CONTRACTS ‘Ar tany ave 18061505 oe — aes fap ome ee An illustrative case is Wood v. Boynton where a seller not ithe claim is just or legal, does not vitiate consent. tocenter into a co be serious and continually imposes his will on B and from B. The contract is clearly annullable. Article 1334, Mutual eror as to ‘ment when the real purpose of he 1%, 198! effect of an agree ‘consent. ( " the parties is frustrated, may viiete Article 1338. There's violence when in order to wrest consent, ‘serious or irresistible force is employed. There is intimidation when one of the contracting parties is compelied by a reasonable and well-grounded fear of an imminent ‘and grave evil upon his person or property, or upon the person of 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 competent authority, ‘There is total absence of free wll in case a person is compelled through violence, The violence must however ible. Thus, if A coerees B into a contract by im until he signs the contract, A, in effect,OBLIGATIONS AND CONTRACTS BIGETERT AND CASES In De Leon v. Court of Appeals™ w that she was intimidated into entering & hreat did not fu te fluenced was sllring tom ry M8 in financial distress, Howewer,noa nate btgation attough t my have boon employed by 8 thi pare In Batez. Courtof Appeal wher the eapondent anon ‘inca not take part in the contrac. (1288) that the letter of anatr unduly noone te ects ne vray emanate noon tet Housing Corporation REO error eee ay ena not oly tom ay fa certain property wot him bt ose ee ae ervone nla party our held that there was no undue aloes gh ee ‘The violence or inti of the contracting parties b the contract. Indeed, the contracting party who is not the subjeet of ‘contract, fo wit: the violence or the intimidation may not even know that the other party has been coerced. Thus, i A is coerced to enter into a contract sesuming that the ter was writes by Senator Feronnde, it ‘with X because G threatens to kill all the children of A if he does not. do so, such contract may be annulled whether or not X knew of the intimidation. *G.R. No, 60860, June 6, 1990, 186 SCRA 846, aecartons AND CONTRACTS. we OBLIGATO AD CASES influence” Martine: ve. Honghong and Shanghai Bark, 16 Pil 282,270) re ennvnt Corporation v. Lirah* "BETS 8 conan In Marat rament agency benune sha “als, the Supreme Court decia, ‘ull and void, thus: are agreement was obtained from tse of influence of executive the contraet not only voidable agreement entered into because of the sary iinfluence which the party has, engaging “Article 1338, There is fraud when, through insidious word ‘ar machinations of one of the contracting parties, the other ls induced to enter into a contract which, without them, he would net hhave agreed to. (1269) Generally, fraud, either at law or in equity, is a false representation of a material fact made by word or conduct with knowledge of its falsehood or in reckless disregard of its truth, in order to induce and actually inducing another to act thereon to his injury.” There must always be damage or injury in cases of fraud For example, if A, an expert jeweler and in order to be able to sell his glass figurine, told X that such figurine is made of Diamond from South Africa and, on such false representation, X bought the figurine, the contract of sale can be annulled by X. TSE om sags 1,201 liam Flin, Commenter onthe Law of Contract, Vane ‘edition, Page 135, bobrseehend to roveal them, a8 when the partes act raatons, constitutes aug)" Bound y content Fepresentation of ing Was one of mortgage Article 1339. Fllure to dsclose facts, when there le a duty within their knowledge or wi the mere fact that one of the par the value of the property subject party does: under the special and pects imposed upon the dominant party to reve to the transaction or when there is a relationship between the parties. Hence, an animal breeder duty to disclose to an ordinary buyer that the particular cow the equitable duty and trust relationship with his pi reveal facts important to the tr will constitute fraud. In Angel Talampas v. Moldex Realty, Inc,” the contractor fand the owner entered into a contract for the former to develop the property of the latter. Mobilization was started but the owner unilaterally cancelled the contract. The Supreme Court awarded actual damages to the contractor beeause ofthe undue termination "WOR No $7150, November 29,197, 80 SORA 21 G.R. No, 170134, dun 17,2018, 158 SCRA 060or aT ne a ; ESSENTIAL RDGOTRACTS: diate ITT, . ‘contractor for moral and exe; Nem — Conant an but rejected the claim of the C - ™plary The law reco, jut rejected the round of fraud. The Supreme Court s izes the practice int ees wm ee eae ener he on sons = me pan er sane, eer en eae: tthe means of the other pi nrep ena Sirona 00 i act amon fe known eterhand ofthe poe inekete onrrsin clearance. i a chee te re Hence, if the opinion turns out te be tae lara the pty ota he peo | logelly deceitful insidious inducing porty ‘There are times when, without really having on cniry into the contract with the respondent. Rot regarded as representation of facts his own thoughts and observation judgment, In such eases, the expression of an the diferenco betwoen opinion and ilerence etnen the vendor of, th eo much, and his ssying that ‘The first isan opinion which the buyer nd isan anertic Under Article 1341, if the opinion is given by one who is thoroughly knowledgeable or is an expert in the field such that he ‘knows for a fact that his opinion will turn out to be false and still g of bad faith exists; a party's persistence based solely on its errone- ‘ous conviction ofthe righteousness of his cause, does not neces- sarily amount to bad faith. Inthe present case the respondent was not shown to have acted in bad faith in appealing and zea induces the other party to enter into the contract on the basis of its case. Under the circumstances, it was merely such false opinion, fraud can be invoked to annul the contract. In its interests stich a ease, the opinion will be considered asa fact, Article 1340. The usual exaggerations in trade, when the otter eee The Principles ofthe American Law o Contract at Law and in Eguiy by ‘party had an opportunity to know the facts, are not in themselves. fraudulent. (n) ohn D. Lawson, LLD., 1805, 2nd Eatin, Pages 281-20.‘OpLIGATIONS AND CONTRACTS AR tae, soe ATION AN pee 548.1048 = song MS cana i ticle 1942, Msrepresentation by a third Person does n, Stes, ro Sear vitae Sorsent, untess such misrepresentatlon has crag? ary fazed im mutual ene on the prt ofthe paren a substantial mistake and the same 1s mutual : : Article 1349. Miorepres ‘Misrepresentation by a third person vitiates consent only ig, fraudulent but may constitute eran yay 1% 9204 Fath te not ereatadsubetantal mistake andthe same is mutual In Rura” Bayt 9f Caloocan v. Court of Appeals where s person induced an elders Soman to co-ign a promiceory note as debtor and to mortgage ne er sald woman knowing the nature of the conte.” Same person succesfully misrepresented tothe bert of the elderly woman to induce the bank to grt it oud that the loan agreement egret by tho elderly woman can be annulled the giving of consent by the partes. Pe said without erefore completely done in may constitute merely an error, Article 1944 n order tht fraud may make a contract voldeb 1t should be serious and should not hove Seat Soe contracting parties. Incidental fraud only obliges the damages. (1270) Rerineene cr smage or injury in faet resulted. The parties must not be in pari delicio. They must not have been mutually guilty of fraud. To annul a contract, which refers to the very cause wi the promissory note (Exhibit 2) valid between the bank and Castro and the mortgage contract (Exhibit 6) binding on Castro boyond the contracts may not bbank end Castro on the groun tion of the court while a case is pending in order lability of properties to the winning party for the Biot, upra, Page 195. a, “a. %G.R. No. Security Bank Corporation v. Great Wall Commercial Press Company, Ine, eal, GR. No 218846, Jamuary 30,2017 "GR. No,L-32116, Api 2, 1981, 104 SCRA 161. aso JBLIGATIONS AND CONTRACTS ee OBLIGATE AND CASES i pte ‘Me Supreme Court in Alinco Tankeh w8. Developmen Bonk ofthe Philippines, etal. made an exhaustive discussion ry dolo eausante and dole incider onder tat oud may make contract io iid be serious and should not have Incidental fraud employing it to pay dames ‘There are two types of freud contemplated in the performance of contracts: dolo incdente or incidental fra {and dolo causante or fraud serous enough to render a contract voidable. ‘In Geraldesv. Court of Appeals, this Court held that: ‘Thi fraud or dolo which is prevent or employed. indemnification of damages, and dolo incidente also obliges the person employing it to pay damages. In Solidbank Corporation v. Mindanao Ferroalloy Corpo- ration, eta, this Court elaborated on the diatinetion between | dolo eausante and dolo incidente: t Fraud refers to all kinds of deception — whether through insidious machination, manips- lation, concealment or misrepresentation — However, the partnership on plaintiff fled a Complaint in order to execute the partner "The defendant filed s Counterclaim, alleging that the tuded him because the latter was not actully the franchise ofa sof drink bottling operation. Thus, “GR. No. 171428, November 11, 2013,{cartons AND CONTRACTS mttorTe AND CASES defendant sought = Court concluded thet: inducement, that led plaintiff to enter into the partnership agreement. But, on the other hand, this supposed ownership ofan exclusive franchise was actually the consideration or price plaintiff gave in exchange for the share of 30 percent granted him inthe net profits of the partnership business. Defend: give plaintiff 30 per cent share because he was transferring his to the partnership. xxx Plaintiff had never been a bottler or a chemist; hhe never had experience in the production or distribution of beverages, As a matter of fact, when We conclude from the above that while the representation that plaintiff had the exclusive franchise did not vitiate defendant's consent. to sa a ESSENTIAL SQUIB sor the nullifeation ofthe contract to enter into SERVE Or xmas seacoast a somaya declared allan void. This Cort als said that in on Sie walter poagea defendant to enter into the perineshin cll sem taiaeerer Sgera the exlusve franchise to soft drink bottling operations ‘To summarize, if there ‘This may make the party against whom fraud is alleged liable for damages. ‘Quantum of Evidence to Prove the Existence of Fraud ‘and the Liability ofthe Parties ‘The Civil Code, however, does not mandate the quantum of evidence required to prove actionable fraud, either for ‘Purposes of annullng a contrac (dolocousante) or rendering & [party liable for damages (doloincidente). The definition of fraud is different from the quantum of evidence nooded ta prove the existence of fraud. Article 1338 provides the legal definition of fraud. Articles 1339 to 1948 constitute the behavior and actions ‘that, when in conformity with the legal provision, may enetivute fraud, Jurisprudence has shown thet to constitute fraud that provides be Cbesininghecns tre par Sond faust be provn by dear an coming evidence. In Moria Continental ities, this Cor that‘OBLIGATIONS AND CONTRACTS LOT AND CASES the iil Cate der Antic 1398 of th ' snare i tte, trough instone words or enn cnt Second, the stendard convincing evider Sovincing evidence, (Citations omited) tn Vitoria, this Court cited Sierra v. Court of Appeaty stating that mere preponderance of evidence wi | proving fraud Fraud must also be discounted, for according tothe Cin Coder | Ar. 1998, There is fraud when, through | insidious words or machinations of one of the | evidence Art. 1344, In order that fraud may make a contract voidab, it should be serious and should In Spouses Carmen Tongson and sJose Tongson v. Emergency not have been employed by both contracting parties, Pawnshop Bi the Supreme Court did not categorize as both causal fraud and incidental fraud but merely a general type of fraud that led to the susbstantial breach of contract giving Fie to ‘the cause of action for rescission and damages, thus: uote ‘Tolentino again, the “misrepreveatation the fraud ust be established by fae videne, and ot merely by 8. pe deceit must be serious. The fraud is serious when ie! ims ota nly radon orn Seaiege ito ere: thet which cannetdacivem prudent person cannot Socata acu bea ground for nullity. The circumstances of each case should ccsuntne a be considered aking int account the personal conditions af the victim.” to annul a contract on the basis of dolo causante, Spee me oes ‘must happen: First, the deceit must be serious \ In the present case, there is no question that the subject, ‘to impress and lead an ordinarily prudent person | ‘matter of the sale is the 264-square meter Davao lot owned by to error. If the allegedly fraudulent actions do not deceive a ‘the Spouses Tongson and the selling price agreed upon by the ‘prudent person, given the circumstances, the deceit here cannot ‘parties is P3,000,000, Thus, there is no dispute as regards the be considered eufficient basis to nullify the contract. In order for the deceit to be considered serious, it is necessary and ‘essential to obtain the consent of the party imputing fraud. To POR. No, 167814, January 15, 2010COnLIGATIONS AND CONTRA — 1 price contain presence ofthe wo regio fr 8a range ee nu according to the Spouses Tong, ‘enders the eoairactof sale wid Aisa greed with the teal co the basis fr the anulment of parties. Under Article 1238 of the Civil Code, there is fraud ‘when, through insidious words o machinations of one of the ct merely the incidental (dolo incident), inducement to the making ofthe contrat. Additionally, the fraud must bo serious, We find no causal fraud in this case to justify the ‘annulment of the contract of sale between the parties. It is to pay 3,000,000 as purchase price therefor. Contrary to the ‘Spouses Tongson’s belie that the fraud employed by Napala was “already operational at tho time of the perfection of the contract of sale," the misrepresentation by Napala that the postdated PNB check would not bounce on its maturity hardly ‘equates to dolo causante. Napela’s assurance that the check be issued was fully funded was not the principal inducement for the ‘Spouses Tongson to sign the Deed of Absolute Sele. Even before Napala issued the check, the parties had already consented and foncequences of slognus ts thes badger ‘Swedish Match, ABv, Court of Appeals, the Court explained the three stages of a contrac, thus In general, contests undergo three distinct extinguishment thereat Indisputably, the Spouses Tongson as the cellers hed ligation of executing the Deed of ation oftheir itl in favor of EPBI. ‘Respondents as the buyers, on the other hand, failed to perform their correlative obligation of paying the full amount of thesqqr10Ns AND CONTRACTS. ou nL AND CASES In Umat o. Court of Appeals® where twas contended that ihe failure of one ofthe partis t pay the consideration proved that th ulated and therefore null and void, such contention, 0 wit contract was absolutely Supreme Court reject ‘The evidence of record, on an overal lation, which renders the contract all and ‘donot intend to be bound af all by the same. The baie characteristic of this typeof simulation the apparent contract is no any way alter the juridical situation ofthe parties. The subsequent one another. Article 1346. An absolutely simulated or fictitious contract {s vold. A relative simulation, when it does not prejudice a third ‘person and is not intended for any purpose contrary to law, morals, good customs, public order or public policy binds the parties 10 ‘thelr real agreement. (n) i cape Javier 0+ Court of Appeals” where a party assigned his timber license to another for a consideration of P120,000 but the "GR No, 89561, Septemt 189 SCRA 629, "GR No, 48194, March 15, 190, 183 SCRA 1990, 138 peed of Assignment di Derount of money, the aes and vid nd there was no t Aa (Court ruled that the tho Supreme the Supreme ed food customs, public order Teal agreement * simulated and therefore void because no scuslomeertr ed from the buyer othe seller. The Supreme Cou eed ante Te reasoned that although no ata! echang of ony woe ate yet the payment was effected between a mutual agreement whereby th ‘enor was pai fom the ann the venice pursuant to th lease contac excetted between them ‘The court found nothing wrong with this arrangement for the same is not contrary to Tas, moral, god customs, oe pble plc, bt rather forthe convenience of bath pres ‘Simulation of a contract may be absolute or relative. The former takes place when the parties do notintend tobebound at all the latter, when the parties conceal ther true agreemet abgolutely simulated ot fttious contract is void. A See also JR. Blanco v: Quasha, GR No. 18148, November 17, 1988, 115 ‘SCAD 522, 318 SCRA 373. "a.sn s0xT10NS AND CONTRACTS OnLAGITEXT AND CASES 1» Pua u Court of Appeals” where it was proven that the person In Pa fas mot even conceived at Pace One a et ve oan ai Sr ie ca ge tof oe tir My ce ap ie le Ss inline oe ter, te, le Inoney from a certain bank and make use of the property ay Bitedral Aer the loan mas obtained, the creditor was rupponey to execute a reconveyance of the property to the debtor who would then ascume the loan from the bank and use the proceeds of the Tan to pay of his loan ta the ereditor. Inthe implementation ofthe schomo, three documents were executed on the same day namely ton of the mortgage made by the debtor to the ed of sale of the property from the debtor to the ‘t document purporting to re-sell the property to contended by the creditors that the sale of the property was authentic after the debtor filed a case to annul al the said documents. The Supreme Court rejected the said contention of ditor and stated the contract of sale was clearly simulated with the bank as there was absolutely the parties clearly did not intend to be bound by the deed of sale and its accompanying documents, ‘sTongoyv. Court of Appeals, 123 SCRA 99, SCAD 622, $18 SCRA 373, GR. No, 14992, November 30, 2000, 137 SCAD 992, 346 SCRA 289. ""GR. No, 195857, November 22, 2000, 138 SCAD 171, 345 SCRA 468 "See also JR. Blanco v. Quasha, G.R. No, 39148, November 17, 1986, 115 At 8 con SSseNTAL QS ee conrmacs lebeabletohare nae sv such sou f money he Soren Grunt daared the stn os ted been the Aside from the fact that a te daughters had no source cewise didnot even present seller received the purchase ny single witness to prove tha price In Milagros C Reyes. Flic C. Asuncion the Supreme Court ruled: a ‘The burden of proving the allege simulation ofa contact falls on those who impugn its regularity and validity. A failure to aischarge this duty wil reoult in the upholding of te contract, ‘The primary considera contemporaneous and subsequent ctions of the p ‘most striking index of simulation is not the filial relationship Detween the purported seller and buyer, but the complete absence of any attempt in any manner on the part of the latter toassert rights of dominion oer the disputed property. GIR No. 188774, March "G:R No, 196085, November 11, 2018, 74 SCRA 6.SECTION 2. — Object of Contracts “Arete 1247, All things which are not outside the comy ‘of man ineuding future things, may be the Object of a contract Sigrte union are not intranamissib may also be the objact ‘contracts. ‘No contract may be entered into upon future except in cases expressly authorized by law. eon ‘AN services which are not contrary to law, morals, goog customs, publ order or public policy may likewise be theo ofa contrac. (1271) property or servie can be the object ofa contract pro ‘within the commerce of man. Hence, one cannot se ublic sidewall as they are not within the comm man, In Moneclang v. IAC; the Supreme Court ruled Phil, 692 [1994], a creek, defined as a recess o {from a river and participating in the ebb and flow conversion into a fishpond, alter or change the nature of the "GR No. 166675, Septamber 30, 1986, 144 SCRA 658, 518 bjoct of cont ‘contracts provided they 2 hold rights over a nd legal stipulation greed to give whatover her share in the conjugal partner y to her heirs once the husband dies, the Supreme Court sai that such agreement does not involve future inheritance, to wit “Arete 1461 of tho 1960 Cv Code anton, GR, No L-14070, March 28, 1981, 1 SCRA 899 Pages 906 907spLAGATIONS AND CONTRACTS OBLIGATE AND CASES ce not refer to. a8) dows not Teth of the husband. The documese will receive by operation fue it a her share inthe ne cana bound do the inponal: HeSe ene One cama hecme a money 00 « Dartitla gases interact reannot be the ‘which is to be performed and therefore val ‘requiring an obligor to deliver a fruit is so general bi is to deliver a kind of fruit euch as a mango or gua valid. provided it is possible to determine the same, new contract between the parties. Hence, a ‘a person to supply all the ice which a restaurant needs is valid because the quantity of ice is easily ascertainable without the need for a new contract, its property along a said property a pref persons given such right was SECTION 3.— Cause of Cont ts ontrac! "Republic, Clribel, GR. No 27008, December 2,197 Torres v. Court of Appeals, GR, No, 184858, December 9, 28 buy the property was re null and void. The SupremeLs@ATIONS AND CONTRACTS OBLIGATENT AND CASES rated to been mot arch the relic, Cl in Republic . where a compromise agreemes the case between litigating parties to q gut compromise Was the mutnat waiver and abandonment ofthe part ‘other. In reciprocal contracts, the obl isthe consideration for that of the other: {In remuneratory contracts, the cause is the service oF bene whichis remunerated. Thus, when a doctor agreed to diagnane'S ie aprile paps a te fe eause for engaging the doctor is for him to lok atthe ‘bi the contract mado ded Tee SP jent and diagnose him. The fee tobe received by the doctor for ig diagnosis is the eause ofthe contract as far as the doctor is concerned eee Incontracts of pure beneficence, the mere liberality ofthe benefactor to the motive when itis clear that the morse pen, the cause of the contract. Tt does not involve any material thing Cause, This i exemplied ss the oe rather it involves only the generosit benefactor. Thus, ‘Authority* involving a void contract because of oi a scholarship contract given by a school where an indigent will nt prtinent portions ofthe decision are as follows ing for his education in the said school has for its cause : the liberality and generosity of the benefactor-sehool Article 1351. The particular motives of the parties in entering {nto a contract are different from the cause thereof. (n) ‘Motive is different from cause. “Cause is the essential reason for the contract, while motive is the particular reason fora | contracting party which does not affect the other party and which | Romualdez, brother inlaw of deposed does not preclude the existence ofa different consideration.” Hence, | Section ofthe Anti-Grat and Corrupt Practices Act (RA. No. a contract of sale of a valuable relic has for its eause the payment $010 Roman, by aon of e roe on the part of the seller and the delve 2 noes, was or of the purchase price on the part of the seller and the delivery of Piscry emrrasrentioie ‘The Management Ci ‘was controlled by Al SG.R. No, 116806, May 8, 1987, 8 SCAD 377 GR. No, L75197, June 2,188,151 SCRA 28 ‘Republic v. Cleribel, GR. No. 127905, Decernber 28, 1910, 36 SCRA 83 ‘Penacov. Ruaya, Gi No, 128102, December 14, 1981, 110 SCRA 46, ‘Republi. Cloribel eupra