Cause of Contracts

Article 1350 described which would be the considered cause for different types of
contracts, namely onerous, remunerative, and gratuitous contracts. In the article, cause, or causa,
is the essential reason the contracting parties have in view when they entered the contract. It is
considered as “why of the contract.” Cause is the Civil Code term for consideration in Anglo-
American or common law, so both terms are used interchangeably.
In a bilateral contract, like purchase and sale, the cause and object of a contract is
distinguished in a matter of viewpoint. The cause of one party is the object of the other, and vice
versa. For example, S sells a phone to B for Php20,000. In the point of view of S, the cause is the
price (Php20,000) and the object is the phone. While in the point of view of B, the cause is the
phone and the object is the price (Php20,000). For onerous contracts, the cause of each contracting
party is the prestation of the other. The cause of each party need not be adequate or of equivalent
value as long the disparity in value, in combination with other circumstances, indicates no fraud,
mistake, or undue influence (Art. 1355). A natural obligation is a sufficient cause to sustain an
onerous contract, while a purely moral obligation cannot constitute a sufficient cause to support
such contract. For remuneratory of remunerative contracts, the cause is the service or benefit which
is remunerated. For contracts of pure beneficence, or gratuitous, the cause is the mere liberality of
the benefactor.
Article 1351 states that “the particular motives of the parties in entering a contract are
different from the cause thereof”. A motive refers to the purely personal or private reason of a
party in entering a contract, which may be unknown to others. It is the remote or indirect reason
for a contract, while cause is known as the immediate or direct reason. Motives are not an essential
part of a contract, and lastly, the illegality of one’s motive does not affect the validity of the
contract. On the contrary, cause is an essential element and its illegality affects a contract’s
validity.
There are, however, certain circumstances wherein the motive may be considered as the
cause in a contract when such motive predetermines the cause. For example, S sells his land to B
for Php250,000. The cause for S is the Php250,000, and his motive for the contract may be to use
the money as a capital for a business. If S’s motive for his contract with B is to defraud a creditor,
the creditor may ask for the recission of the sale (accion pauliana).
Article 1352 discussed that contracts without cause or with unlawful clauses produce no
legal effects. Cause is the essential reason which moves the parties to enter into the contract, and
it has three requisites; (1) its existence at the time the contract is entered into, (2) it must be lawful
— in accordance with the law, morals, good customs, public order or public policy, (3) it must be
true or real.
Absence of cause means that there is lack of valid consideration for the contract. And,
contracts without cause confer no right, so, a completely simulated or fictitious contracts are void.
On the other hand, inadequacy of cause is not a ground for relief and failure of cause does not
render a contract void. Failure of cause results only in a right to demand fulfillment or cancellation
of the obligation. Illegality of cause makes the contract null and void.
 Article 1353 of the Civil Code states that "the statement of a false cause in contracts shall
render them void, if it should not be proved that they were founded upon another cause which is
true and lawful." The falsity of cause mentioned in the above article refers to the valid statement
written in the contract, but such statement is not true. There are two cases of a false cause; it may
be erroneous or simulated.
An erroneous falsity of cause invariably produces a contract's nonexistence, for it is
considered that such cause does not exist. Unlike the first case, a simulated false cause does not
always cause a void contract. When a false cause is simulated, there is a possible hidden but true
cause sufficient to support the contract. If the parties can show another true and lawful cause, such
agreement will bound them (Art. 1346).
For example, X promised to pay Y Php 1,000.00 for the latter's service. However, Y did not
render such service. So, in effect, the obligation to pay is nonexistent since the cause for X (the
service renumerated) is erroneous — there is, in fact, no cause. Another example, S and B are in
a contract of sale. If the stated price in the deed of sale is false, there is no contract of sale. The
statement of price is simulated if B can prove that there is another consideration that the contract
is founded upon, like B exchanged his car for the land — making the contract valid, but as a
contract of barter or exchange.
Article 1354 describes that the cause is presumed to exist and is lawful, although it is not
stated in the contract — unless the obligor proves the contrary. The cause of a contract is not
necessarily stated. The presumption that the cause exists and is lawful conforms with the natural
order of things. A mere claim that a contract has no consideration is not enough to overthrow the
presumption, but a preponderance of evidence must be filed to prove the allegation.
Article 1355 explains that lesion or inadequacy of cause will not itself invalidate a contract
unless there is a fraud, mistake, or undue influence, and except in cases specified by law. A lesion
is any damage caused by an unjust or inadequate price (8 Manresa 740). According to Bouvier's
Law Dictionary, the lesion is the injury suffered caused by inequality by one party who does not
receive the equivalent for what he gives in a commutative contract. The general rule is that a party
will not be relieved from his obligation by the simple fact that the contract may turn out to be
financially disadvantageous on his part. The Court will only defend one party if they are defeated
illegally. The Court also has the power to release a debtor from an obligation if the fulfillment has
become so difficult.
Simulation of contract and gross inadequacy of price are different legal concepts with
different effects. A contract is simulated if the parties have no intention to be bound by the contract,
and therefore it is void. A simulated contract contains no real agreement; hence it has no legal
effect whatsoever. However, inadequate consideration may still embody a valid agreement. When
the parties mutually consented to a price, the sale is not simulated despite the possibility of the
price’s inadequacy.
 SECTION 3 — Cause of Contracts

I. Cause of Contracts
A. Definition
a. The reason or purpose the contracting parties have to enter into a contract
b. Considered as the “why of the contract”
c. The immediate or direct reason for a contract
d. An essential element of a contract
e. The term cause is used interchangeably with consideration
B. Requisites of cause
a. It must exist at the time the contract is entered into (Arts. 1352, 1409[3])
b. It must be lawful (Ibid)
c. It must be true or real (Art. 1353)
C. The presumption for a cause of contract is that it exists and is lawful, even if they
are not stated (Art. 1354)
D. Absence or want of cause (Art. 1352)
a. Meaning
i. There is a total lack of any valid consideration for the contract
b. Effect
i. Contracts without cause confer no right and produce no legal effect
E. Failure of cause (Art. 1352)
a. Effect
i. Failure of cause does not render a contract void
ii. Failure to pay the consideration will only result in a right to demand
fulfillment or cancellation of the obligation
F. Illegality of cause (Art. 1352)
a. Meaning
i. The cause of the contract is contrary to law, morals, good customs,
public order, or public policy
b. Effect
i. Illegal cause renders contracts null and void
G. Falsity of cause (Art. 1353)
a. Meaning
i. The contract has a valid cause but it is not real
b. Kinds and Effects
i. Erroneous False Cause
1. Invariably produces the inexistence of a contract
ii. Simulated False Cause
1. The hidden yet true cause may be sufficient to support the
contract, so such false cause does not always make a contract
void
 H. Lesion or inadequacy of cause (Art. 1355)
a. Meaning
i. Lesion is any damage caused by the fact that the price is unjust or
inadequate (8 Manresa 740)
b. Effect
i. The general rule is that lesion or inadequacy of cause is not enough
to invalidate a contract, except in cases specified by law or unless
there is fraud, mistake, or undue influence
II. Classification of contract according to cause (Art. 1350)
A. Onerous Contract
a. The cause for each contracting party is the prestation or promise of a thing
or service by the other
B. Remuneratory or Remunerative Contracts
a. The cause is the service or benefit which is remunerated
C. Gratuitous Contracts
a. The cause is the mere liberality of the benefactor
III. Object of contract (Art. 1350)
A. Cause and object are different and which the distinction lies on the viewpoint of
parties in case of bilateral or reciprocal contracts
a. The cause of one party is the object of the other, and vice versa
IV. Motive of parties (Art. 1351)
A. Definition
a. The purely personal or private reason of contracting parties
b. The condition of mind which incites to action
c. The remote or indirect reason for a contract
d. It is not an essential element of a contract
B. General rule
a. The motive of a party does not affect the validity nor existence of a contract
C. Under some circumstances, the motive can be considered as the cause when such
motive predetermines the cause