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CONTRACTS (Arts. 1305-1317.

)
Chapter 1
GENERAL PROVISIONS

ART. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service. (1254a)

Meaning of contract.
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.1
(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.

- Ang obligation ay puwedeng walang kontrata pero kapag mayroong kontrata automatically
mayroong obligation.
- Every time na may contract, automatically there is also an obligation.
- Enforceable at court ang contract
- Ang agreement ay cannot enfored at the court
- All contracts are agreement but not all agreements are contracts

Elements
1. Essential elements (Art. 1318-1355) – required ang tatlong yan dahil hindi sya tatawaging
kontrata kapag wala iyan.
A. Consent – agreement, may pahintulot
B. Object – subject matter of a contract,
- object of a contract may be:
1. things (as in sale of property)
2. rights (as in assignment of credit)
3. service (as in agency)
C. Cause or consideration – the why of the contract
- essential reason which moves the contracting parties to enter into a contract
2. Natural elements (e.g., warranty against eviction and hidden defects in case of sales) – not
required elements. Natural elements are elements that are initially present in some certain
contracts pero pwede syang alisin.
3. Accidental elements (e.g., stipulation such as interest in loan) – hindi initially na nag eexist sa
isang contract unlike sa natural elements. Accidental elements does not exist habang ginagawa
ang contract, it must be stipulated by the parties.

Classifications
1. According to perfection:
A. Consensual – perfected by consent, object, cause (COC)
(e.g., sales, partnership, real mortgage)
B. Real – perfected by COC + delivery
(e.g., pledge, loan, deposit)
C. Formal or Solemn – perfected by COC + formalities required by law
(e.g., donation of real property, chattel mortgage, antichresis)

2. According to relation to other contract:


A. Principal – can exist on its own
(e.g., sales, loan)
B. Accessory – existence depends upon a principal contract
(e.g., pledge, mortgage, guaranty)
C. Preparatory – needed for the formation of subsequent contracts
(e.g., partnership, agency)

3. According to parties obliged:


A. Unilateral – only one party is obliged
(e.g., commodatum, donation)
B. Bilateral – both parties are obliged
(e.g., sales, barter)

4. According to name:
A. Nominate – the law gives it a special name or destination
(e.g., sales, loan, partnership, donation)
B. Innominate – the law does not give it a special name or designation
i. Do ut des: I give that you may give
ii. Do ut facias: I give that you may do
iii. Facio ut facias: I do that you may do
iv. Facio ut des: I do that you may give

When Dealing with Innominate Contracts


1. Stipulations of the parties
2. Rules governing law on obligations and contracts
3. Rules governing the most analogous contact
4. Customs of the place

5. According to risks:
A. Commutative – when the undertaking of one party is considered the equivalent of that the
other.
(e.g., sales, lease)
B. Aleatory – when it depends upon an uncertain event or contingency both as to benefit or loss.
(e.g., contract of insurance, sale of hope)

6. According to cause:
A. Onerous – cause has valuable consideration
(e.g., sales, lease)
B. Gratuitous – cause is purely generosity
(e.g., commodatum, donation)
C. Remuneratory – cause is based on services or benefits already received
(e.g., employment contract)
7. According to binding force: Gaano mababind sa contract
A. Valid
B. Rescissible
C. Voidable
D. Unenforceable
E. Void

Stages
1. Preparation/Conception/Generation/Negotiation
2. Perfection/Birth/Formation
3. Consummation/Death/Extinguishment

Characteristics (MARCO)
1. Mutuality of contracts
2. Autonomy/Liberty of contracts
3. Relativity of contracts
4. Consensuality of contracts
5. Obligatory force of contracts

Mutuality of Contracts

The contract must bind both contracting parties; its validity or compliance cannot be left to the will of
one of them. (art. 1308)
- Kapag may dalawang parties na pumapasok sa isang kontrata, hindi pwede na yung validity or
yung compliance ay nakarest lang sa isang tao. Hindi yun matatawag na kontrata dahgil ang
kontrata ay mutual, ibig sabihin pinagkakasunduan yan ng dalawang parties. Kung may isang
bagay na hindi sila nagkasundo sa kontrata,hindi pwedeng maging effective or valid yun.

The determination of the performance may be left to a third person, whose decision shall not be binding
until it has been made known to both contracting parties. (art. 1309)
- Kung sakaling hindi magkasundo ang dalawang parties pwedeng ibigay yung determination ng
validity non or compliance ng specific stipulation non within the contract to a third person. Pero
kahit binigay mo na yun sa third person para magdecide, kailangan ay mayroon paring
communication yun sa dalawang parties at dapat na mapagkasunduan pa din dahil hindi pa din
pwede at hindi yun magiging effective kapag hindi napagkasunduan.

The determination shall not be obligatory if it is evidently inequitable. In such case, the courts shall
decide what is equitable under the circumstances. (art. 1310)
- Kung sakaling hindi pa din magkasundo, pwede silang pumunta sa korte tapos idedetermine
kung ano yung magiging equitable.

Example:
S sold his parcel of land to B. It was agreed that X, a real estate appraiser, would be the one to determine
the reasonable price of the land. X, then, fixed the price after considering all the circumstances and
factors affecting the value of the land.

Autonomy of Contracts
Also called liberty of contracts or freedom to stipulate in contracts.

The contracting parties may establish such stipulations, clauses, terms, and conditions as may deem
convenient, provided they are not contrary to law, morals, good customs, public order, or public policy.
(art. 1306)
- In short under the economy of contract, which is a characteristic of contract, pwede tayong
gumawa ng kahit anong klase ng kasunduan basta hindi ito labag sa mga nakasualt sa taas.

Relativity of Contracts

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 is not liable beyond the value of the property he received from the decedent.
(art. 1131 par. 1)
- Ang kontrata ay nageexist lang between the parties. Ibig sabihin, anuman ang meron, anuman
ang benefit, or anuman ang consequence dun sa kontrata na yun ang involve lang ay yung
dalawang parties na yun or yung mga assigns nila or heirs in case may namatay so sasaluhin nila
yung right to demand.

 Contracts take effect between the parties in the contract (with exceptions)
 Contracts are generally transmissible except:
o Law
o Stipulation
o Nature
 Their heir is not liable beyond the value of the property he received from the decedent.

Exceptions:
1. Stipulation Pour Autrui (art. 1131 par. 2)
2. Third persons in possession creating real rights (art. 1312)
3. Contract is entered to defraud creditor (art. 1313)
4. Third person induced a party to a contract to violate the contract (art. 1314)

Stipulation Pour Autrui


- Direct conferment of a benefit toward a third person.
Requisites:

a. There must be a stipulation in favor of a third person.


b. The stipulation must be part, not the whole of the contract.
c. The contracting parties must have clearly and deliberately conferred a favor upon a third person,
NOT a mere incidental benefit or interest.
d. The third person must have communicated his acceptance to the obligor before its revocation.
e. No relation of agency exists between any of the parties and the third person favored.
Example:
D is indebted to C for P1,000,000 with 12% interest. It was stipulated that X will receive the 12%
interest. The stipulation is accepted by X and duly communicated the acceptance to D and C.

After a year, D and C decided to change the contract into giving a specific house and lot. Under
relativity of contracts, third person cannot act upon the decisions of the parties in a contract. However, X
in this case is an exemption.

Third persons in possession creating real rights

S sold to B a specific land for P1, 000,000. B occupied the said land but did not register it. One day, S
sold the same land to X. X registered the said property at the Registry of Deeds.
- Contract between S and B only. Pero binenta ulit sa ibang tao at niregister. Pwedeng mangielam
ang third person sa contract although he is a third party with regards to the contract because he is
the rightful owner of the land.

Contract is entered to defraud creditor

D is indebted to C for P1,000,000. D fearing that he won’t be able to pay the debt and ultimately his land
being levied, sold the said land at a very low price to X with the condition that he can purchase it back.
- The main contract is between D and X and sabi sa relativity contract hindi pwedeng mangielam
ag third person. But in this case, pwedeng mangielam si C kasi isa syang creditor na nadefraud
by the acts of D

Third person induced a party to a contract to violate the contract

After agreeing to sell his parcel of land to B, S sells the land to C instead because of the inducement of
D. In this case, B can sue D for damages.
- Contract between B and S. Ang isa ay hindi nag comply, instead binenta ni S kay C. In this case,
pwedeng mandamay ng third party. Under the exemption on the relativity of contract, pwedeng
kasuhan yung third person na nag induced sa kanya not to comply on his obligations.

Consensuality of Contracts

Contracts are perfected by mere consent, and from that moment the parties are bound not only to the
fulfillment of what has been expressly stipulated but also to all the consequences which, according to
their nature, may be in keeping with good faith, usage and law. (art. 1315)
- Contracts are perfected by mere consent with regards to object and the cause. Ibig sabihin ito
lang yung contracts that are generally perfected by COC.

Exceptions: Real (art. 1316) and Formal Contracts

Obligatory Force of a Contract

Obligations arising from contracts have the force of law between the contracting parties and should be
complied with in a good faith. (art. 1159)
- Kapag ikaw ay pumasok sa isang contract mababind ka na doon.
ART. 1305. A contract is a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.

- Ang pagtatagpo ng dalawang isipan – it takes place when an offer by one party is accepted by the
other.
- Is it necessary that contract must be in writing? – No, because on the definition of contracts says
that it is the meeting of minds. Meaning, it is not necessary na nakasualt sya except sa contracts
na may exception. May mga kontrata na nakasulat na batas na nirerequire ang writing but
generally hid naman necessary. Sa sandaling tinanggap ng isang party ang offer ng kabilang
party without any qualifications.

 Contract is one of the sources of obligations.


- Yung obligations ay mas broad.
 Obligations is the legal tie or relation itself that exists after a contract has been entered into.
 Hence, there can be no contract if there is no obligation. But an obligation may exist without a
contract.
 All contracts are agreement
- Contract is enforceable through a legal proceedings kasi mayroon din naming mga agreements
which cannot be enforced by action in courts.
 NOT all agreements are contracts.

Stages in the Life of Contract


1. Preparation or Conception
o Preparatory step – which is eventually will lead us to the perfection of the contract.
o Bargaining point – may nag offer pero hindi pa nagkakasundo, wala pang meeting of
minds.
o Negotiation stage
2. Perfection
o Meeting of minds regarding the subject matter and the cause of the contract – eto yung
from the moment ang parties come to an agreement or come to agree on the terms of their
contract.
3. Consummation
o Parties performed their respective obligations, and so the contract is put to an end.

Example:
Preparation or Conception: On December 1, P offer to sell his car for P1,000,000
Perfection: On December 2, G counter offer and said that she will buy the car for P800,000
Consummation: On December 3, P deliver the car to G and G pay P800,000

Classifications
1. According to Perfection or Formation:
a. Consensual – perfected by mere agreement of the parties (ex. sales, lease)
b. Real – requires not only the consent of the parties for their perfection but also the delivery of
the object by one party to the other (ex. commodatum, deposit, pledge)
c. Formal or Solemn – requires some particular form (ex. donation, chattel, mortgage)
2. According to Cause or Equivalent Value of Prestation:
a. Onerous – each of the parties aspires to procure for himself a benefit through the giving of an
equivalent or compensation (ex. sale)
b. Gratuitous – one of the parties proposes to give the other a benefit without any equivalent pr
compensation (ex. commodatum)
c. Remunerative – for service rendered previously
3. According to Degree of Dependence:
a. Principal – one which can subsist independently from other contracts and whose purpose can
be fulfilled by themselves (ex. sales, lease) If stand alone
b. Accessory – one which can exist only as a consequence of or in relation with, another prior
contract (ex. pledge, mortgage) Ex. mayroong principal obligation which is loan tapos iattach
doon si mortgage
c. Preparatory – one which has for its object the establishment of condition in law which is
necessary as a preliminary-steps towards the celebration of another subsequent contract (ex.
partnership, agency) Pag yung parties ay hindi pa nila kino consider yung contract as an end
by itself. Pero sya ay means lang for a future transactions or contracts na gagawin.
4. According to Parties Obligated:
a. Unilateral – on which gives rise to an obligation for only one of the parties (ex.
commodatum, gratuitous deposit) Pero ang consent ay bilateral
b. Bilateral – one which gives rise to reciprocal obligations for both parties ex. sale, lease)
Involve parties are required to render prestations
5. According to Name or Designation:
a. Nominate – one which has a name and is regulated by special provisions of law (ex. sale,
deposit, agency, lease)
b. Innominate – no specific name or designation in law
6. According to Subject Matter:
a. Involving Things (ex. sale, deposit, pledge)
b. Involving Rights or Credits (ex. usufruct, assignment of credits)
c. Involving services (ex. agency, lease of services)
7. According to Number of Person who Participated in the Drafting of Contracts:
a. Ordinary (ex. sale)
b. Contract of adhesion (ex. insurance contract) – Provisions are drafted by the only
participation of the other party is to sign his name, his signature or his adhesion to the
contract.

ART. 1306. The contracting parties may establish such stipulations, clauses terms, and conditions
as they may deem convenient provided, they are not contrary to law, morals, good customs, public
order, or public policy.

- This provision talks about the freedom to stipulate/autonomy of will/principle of


freedom/principle of autonomy of contracts.
- The right to enter into contract, actually is one of the liberties guaranteed by the constitution.
- General rule, yung parties are actually free to stipulate into anything. They can establish to such
stipulations, clauses, terms, and conditions as they may deem convenient.

ART. 1307. Innominate contracts shall be regulated by the stipulations of the parties, by the
provisions of Titles I and II of this Book, by the rules governing the most analogous nominate
contracts, and by the customs of the place.

- This provides for the answer kung ano ba ang mag gogovern sa kanila kasi lahat supposedly
igogovern. But innominate contracts has no specific designations in the law.
- Ang mag gogovern daw sa mga innominate, una ay ang mga stipulations ng parties, pangalawa is
the provisions Title I and II of this Book (actually this refers to the law on obligations and
contracts, panagtlo ay yung rules governing the most analogous nominate contracts at pang-apat
ay yung customs of the place.

Four Kinds of Innominate Contracts


1. Do ut des (I give that you may give)
2. Do ut facias (I give that you may do)
3. Facio ut des (I do that you may give)
4. Facio ut facias (I do that you may do)

ART. 1308. The contracts must bind both contracting parties; its validity or compliance cannot be
left to the will of one of them.

- Commonly referred as the principle of mutuality of contract


- Both parties are bound meaning the principle is based on the equality of the parties.
- Contract should not just be left or should not just depends upon the surreal name ng isang party
lang.
- Both parties are of the same footing.
- Lahat ng parties inside the contract dapat may say.
- A contract can be renewed, revived, extended, modified, renounced, terminated but with mutual
consent of the parties.
Example:
In loan contract, pag yung isang party has the SOLE DISCRETION/UNILATERAL RIGHT to adjust
interest anytime as he wants.

P agree to sell his car to G. G agreed to pay P1,000,000


- Stipulations that P ALONE will determine/adjust the price of the car, and G has no right to
negate P’s decision, violates Mutuality of contracts.
- That is the time that the sale is perfected. The mere fact that a party to a contract has made a bad
bargain.
- Bad bargain in itself is noy ground for setting assign the agreement or does not necessarily
violate mutuality of contracts.

ART. 1309. The determination of the performance may be left to a third person, whose decision
shall not be binding until it has been made known to both contracting parties.

- Eto yung exception. Hindi pwede or yung compliance ng contract should not be left or cannot be
left to the will of one of the contracting parties only di pwedeng sa kanya lang at sya lang ang
magdecide.
- However, under this article 1309, determination of its performance may be left to a third person.
- This rule is actually not absolutely, may exception din sya. Ang exception ay actually article
1310.

Example:
P sold his land to G. Both agreed that there will be one person who will determine the price of the land
and it will be B who is a real estate appraiser.
- Magiging binding lang yung desisyon or yung determination ni third person after nyang ipaalam
sa parties.

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.

- The decision of third person ay hindi rin binding if yung determination nya ay evidently
inequitable
- If ganun yung nangyari, ang court na ang magdedecide.

ART. 1311. 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 is not liable beyond the value of the property he
received from the decedent.

If a contract should contain some stipulation in favor of a third person, he may demand its
fulfillment provided he communicated his acceptance to the obligor before its revocation. A mere
incidental benefit or interest of a person is not sufficient. The contracting parties must have
clearly and deliberately conferred a favor upon a third person.

- The principle of relativity of contracts. Meaning, yung contracts are generally effective only
between parties.
- General rule, contracts will take effect only between the parties, their assigns and heirs. Yan
yung principle of relativity of contracts.
- Yung exception jan is kung yung rights and obligations which arise from that contract is actually
not transmissible.
- Aericle 1311 provides for a principle of contract. Ibig sabihin, sila lang ang may rights and
obligations under that contract.
- Sila lang ang may rights and obligations under their contract. Sa kanila lang effective yung
contracts. Yan yung ibig sabihin ng Principles of Relativity. Yung parties lang, hindi kasama
yung hindi PRIVY (stranger/third person) to the contract.
- Strangers cannot demand at your contract, mas lalong hindi rin sya pwedeng magdemand for its
annulment.

Example:
SI P ay may utang kay G na P1,000,000.
- Silang dalawa yung parties and the contract will take effect between them.
- But if later on, namatay si G, yung bayad ni P ay ibibigay nya sa mga heirs of G
- If si P naman ang namatay, the heirs of P will pay G P1,000,000
- Kung walang pera, yung property na naiwan ni P ang ibabayad kay G.

Stipulation Pour Autrui Requisites:


1. There must be a stipulation in favor of a third person.
2. The stipulation must be part, not the whole of the contract or the contract itself.
3. The contracting parties must have clearly and deliberately conferred a favor upon a third person,
NOT a mere incidental benefit or interest.
4. The third person must have communicated his acceptance to the obligor before its revocation by
the obligee or the original parties.
5. Neither of the contracting parties bears the legal representation or authorization of the third party
for otherwise the rules on agency will apply.

Example:
Si P ay may utang kay G na P10,000 at may 12% na interest payable on December 25, 2020. Tapos sa
contract, yung 12% interest daw ay ibibigay kay B, a third person.
- Take note that the two parties involve ay si P at G pero mayroon syang stipulation in favor of B.
- Dito sa situation na to, dapat si B ay makipag communicate para sa acceptance to P and G.
Otherwise, hindi sya ma entitled to the benefit of the contract
- So, the moment B has communicated the for the acceptance, B becomes a party to the contract.
Exception to the Principle of Relativity of Contracts
Stipulation pour Autrui (art. 1311 par. 2)
 Third person is bound by contracts creating real rights (art. 1312)
 Right of defrauded creditors under (art. 1313)
 Contract is violated through inducement by third person (art. 1314)

Art. 1312. In contracts creating real rights, third persons who come into possession of the object of
the contract are bound thereby, subject to the provisions of the Mortgage Law and the Land
Registration Laws.

- This article is an exception to the general rule that a contract binds only the parties. Kasi sabi
dito, yung third person is bound by contracts creating real tights

Example:
Suppose si P mortgage his land to G
Mortgage as to the parcel of land of P in favor of G as a security for his death.
Since gipit si G kulang ang pera, binenta nya yung same land kay B
- Yung mortgage nay un is actually nakaregister in the registry of property. So since owner pa rin
naman si P ng kanyang lupa, pwede nyang imortgage yung kay G.
- In this case, binili na ni B at dun sa pagbili nya at alam nating mayroon syang (diko marinig)
dahil yung lupang yun ay mayroong mortgage na in favor kay G.
- In other words, kahit pa si G ay hindi party nung contract of sale between P and B, dahil sa
contract of mortgage, dahil mayroong pre-existing contract of mortgage which is actually a real
rights dahil nakaregister sya then B will be bound by the contract between P and G]
- Sa contract ni P and G third person si B.
- Sa contract ni P and B third person si G.

ART. 1313. Creditors are protected in cases of contracts intended to defraud them.

- It is another instance kung ang outsider, third person or stranger can interfere with another
contract.
- The concept is actually not new
Example:
Si P ay may utang kay G na P1,000,000 tapos si P ay may property. May lupa siya na nakapangalan sa
kanya at dahil ayaw niyang maattach ang property na yon bago pa man ang due date ng utang nya kay G
kasi wala syang pambayadat alam nya na ang mangyayari ay iaattach ang lupa na yon para ipambayad
sa utang nya kay G. So, ang ginawa ni P ay dinonate nya ang lupa kay B para wala nang mahagilap at
makuha si G.
- In this case, G is actually the defrauded creditor, siya ay may right to impune the contracts
between P and B although she is not a party to that contract. She is just a stranger.
- G is given by law the right to ask for the recession or the cancellation of that donation In order
that she may be paid.

Art. 1314. Any third person who induces another to violate his contract shall be liable for damages
to the other contracting party.
- This position provides for another exception to the principle of relativity.
- Contracting party are actually the enjoyed party has the right to claim for damages against that
person who induces to violate his contract.
- Whoever is injured may sue for damages for damages. He can claim for damages.
- The word induced in this provision refers to the situations where a person causes another to
choose one course of conduct by persuasion or intimidation

Example:
Supposedly, G is a movie actress who have a 1year contract with 123 Studio. B is a friend of G, induces
G to break her contract without justifiable cause. 123 Studio, can sue B for damages.
- The liability of B does not arise ex contractor for actually there are no contracts between B and G
and that studio. Pero dahil sa article 1314, pwedeng makapag file ng case or makapag (diko
alam) ng damages ang 123 studio against B. Because B actually induces G to violate her contract
with 123 studio.
- A third person is not liable where sufficient justification for interference or inducement can be
shown.

yyART. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and law.

- This refers to the, another principle are characteristics of contracts, the consensuality of
contracts.
- It simply means perfection and contract by mere consent of the parties regarding the subject
matter or the object of the contract and the cost of the contract.
- Consent as to the object and to the cause of the contract.
- Signing is not generally a legal requirement in entering into a contract. Pwede lang na meeting of
minds, it is not necessarily for a contract to be in writing unless the law requires it to be in
writing or to have some specific formalities.
- Consequence of perfection of contract: the parties will be bound first to the fulfillment of what
has been expressly stipulated. They will now be bound to the fulfillment kung ano man ang
mapagusapan nila. Second, as to the consequences na according to their nature maybe in keeping
with goo faith usage and law.

How contracts are perfected?


General Rule: Principle consensuality of contracts
Exceptions: Real contracts – kailangan ng delivery
Formal contracts – nagrerequire ng specific forms or specific documents like
documentation.

ART. 1316. Real contracts, such as deposit, pledge and commodatum, are not perfected until the
delivery of the object of the obligation.

- First exception to the rule, non-consensuality of contracts.


- General rule contracts is perfected by mere consent, this article 1316 hindi lang mere consent
para maging perfected yung contracts. Some real contracts such as deposit, pledge, and
commodatum are not perfected until the delivery of the object of the obligation.
- Dito na yung perfection ng contracts. Actually, same pa rin sila ng consent pero may nadagdag
lang na requirement and that is delivery.
- In real contracts, delivery is required for the perfection of the contract.

Example:
June 1, P borrowed money from G worth P10,000 with a promise that P will give his diamond ring to G
as a security on June 15. Now, before June 15 even if G gave the P10,000 to P the contract of pledge is
not yet perfected because in the contract of pledge the perfection is only upon the delivery of the object
pledge.
- Hindi pa rin naman naidedeliver kay G ang diamond ring so wala pang contract of pledge pero
mayroon nang contract of loan kasi binigay n ani P kay G ang P10,000

ART. 1317. No one may contract in the name of another without being authorized by the latter, or
unless he has by law a right to represent him.

A contract entered into in the name of another by one who has no authority or legal representation,
or who has acted beyond his powers, shall be unenforceable, unless it is ratified, expressly or
impliedly, by the person on whose behalf it has been executed, before it is revoked by the other
contracting party.

- This provision talks about a form of unenforceable contracts.


- Simply says, yung mga unathorized contracts. So, contracts entered into without the authority of
the principal is the unenforceable contracts.
- Contract entered into the name of the owner or another person purpose without that authority
from that person is unenforceable.

Example:
G own a car and that car sold by P without being authorized in the name of G but without the authority
from G. P sold the car to B.
- So yung sale being unauthorized is unenforceable, hindi sya valid.
Requisites for a person to contract in the name of another
1. He must be authorized (expressly or impliedly).
2. He must have by law, a right to represent him.
3. The contract must be subsequently RATIFIED (expressly or implied).
4. He must act within his power.
CONTRACTS (Arts. 1318-1355.)
Chapter 2
Essential Requisites of Contracts

ART. 1318. There is no contract unless the following requisites concur:


(1) Consent of the contracting parties;
(2) Object certain which is the subject matter of the contract;
(3) Cause of the obligation which is established.

Classes of Elements of Contracts


1. Common – present in all contracts such as consent, object, and cause.
2. Special – present only in certain contracts.
o Real Contracts – delivery
o Solemn or Formal Contracts – compliance with the formalities required by law

SECTION 1. — Consent

ART. 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the acceptance
absolute.
A qualified acceptance constitutes a counter-offer. Acceptance made by letter or telegram
does not bind the offerer except from the time it came to his knowledge. The contract, in such a
case, is presumed to have been entered into in the place where the offer was made.

- Offer must be certain – it must not be obviously vague, not misleading, or major joke it must be
seriously intended. The offer must be definite so that upon acceptance of the other parties, the
agreement can be reached on the whole contract.
- Acceptance absolute – it must be unqualified. Acceptance absolute talaga, inaccept ng buo
walang kondsiyon at pwedeng recounter offer.
- Second paragraph: talks about acceptance through correspondence. If yung acceptance ay
pinadala through a letter or telegram.
- Acceptance made by letter or telegram does not bind the offerer except from the time it came to
his knowledge – magiging bidning lang yung offer ni offeror from the time na inaccept na yung
offer nya and it has come to his knowledge.

Consent
Requisites:
1. It must be manifested by the concurrence of the offer and acceptance (Arts. 1319-1326)
2. The contracting parties must possess the necessary legal capacity (Arts. 1327-1329)
3. It must be intelligent, free, spontaneous, and real (not vitiated) (Arts. 1330-1346)

Requisites of Consent:
1. There must be two parties
2. The parties must be CAPABLE or CAPACITATED
3. There must be NO VITIATION of consent
4. There must be NO CONFLICT between what was expressly declared and what was really
intended
5. Intent must be declared PROPERLY

Intelligent – there is legal capacity to act


Free and Voluntary -

Consent
1. It must be manifested by the concurrence of the offer and acceptance (Arts. 1319-1326)
o Offer – a specific proposal to enter into an agreement with another.
o Acceptance – agreeing verbally or in writing to the terms of a contract, which is one of
the requirements to show there was a contract.

Offer – an offer must be intentional certain (Art. 1319 par. 1)


Example: When offering to sell something, you should specify the object being sold.

Acceptance
Note:
1. An acceptance must be absolute (Art. 1319) – absolute: inaccept mo lahat ng inooffer.
2. Communicated to the offeror (Art. 1319 par. 2 and 1322)
3. May be expressed/implied – kapag express talagang sinabi, kapag implied actions

Example:
S offers B to sell a specific house and lot in Quezon City for P1,500,000. B accepted the offer but is only
willing to buy the land.
- Inaccept yung offer pero hindi lahat so wala pang consent at wala pang offer so this is a counter-
offer.

Promises in Offer and Acceptance


Promise Binding Perfected Contract
Unilateral promise No None
Binding if promise is supported
Unilateral promise accepted Option contract only
by consideration
Binding contract of promise to
Bilateral promise Yes
enter into contract
Example:
S offers to sell his land to B for P1,000,000. B refused. However, S still insist that he is willing to give B
30 days to decide. However, B still refuse. Again, S still stand with his promise.
- Unilateral promise that is not accepted by other party.
- Policitacion
- In this case, there will be no case wherein mababind sila.

S offers to sell his land to B for P1,000,000. B refused. However, S still insist that he is willing to give B
30 days to decide. B accepted the promise.
- Within 30 days hindi magiging binding ang unilateral promise na ito.
- Unilateral promise accepted
- Binding if the promise was supported by a consideration. Pero in this case walang consideration
na magsusupport sa promise.

S offers to sell his land to B for P1,000,000. B refused. However, S still insist that he is willing to give B
30 days to decide. B accepted the promise and gave P1,000 as option money.
- Magbabind si S sa kanyang promise kay B
- Unilateral promise accepted

S promised to sell his land to B for P1,000,000 after 1 month. Likewise, B promise to buy S’s land for
P1,000,000 after 1 month.
- Bilateral promise
- Binding sya without the need of valuable consideration and this converts into a perfected
contract. However, not a perfected contract of sale, it is still a binding contract that will bind
them to sell the said property in the future. Which is specifically one month.

ART. 1320. An acceptance may be express or implied.

- Express meaning in the form of expressly either written or verbally sinabi.


- Implied is challenging.

ART. 1321. The person making the offer may fix the time, place, and manner of acceptance, all of
which must be complied with.

- It talks about the things that maybe fixed by the offerer at ito ay yung time, place, and manner of
acceptance. So, the offerer ang magfifix nyan and then any act contrary dun sa nirequire na offer
actually constitutes a counter offer or counter proposal on the part of the offering.
- Pwedeng ispecify kung paano kung paano iaaccept ng kabilang party ang offer dahil kung hindi
sumunod ang kabilang party dun sa manner ng acceptance na gusto nya may chance na hindi
magkaroon ng valid consent. Kapag walang consent ibig sabihin walang kontrata na nabuo.
- All of which must be complied with, so kung ano yung manner of acceptance na gusto nung nag
offer, kailangan sundin yon nung nag aaccept para magkaroon ng consent.

Offer
Special Cases of Offers:
1. The person making the offer may fix the time, place, and manner of acceptance, all of which
must be complied with. (Art. 1321)
2. An offer made through an agent is accepted from the time acceptance is communicated to him.
(Art. 1322)
3. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of either
party is conveyed. (Art. 1323)
4. Advertisement for bidders are simply invitations to make offers. (Art. 1326)

ART. 1322. An offer made through an agent is accepted from the time acceptance is
communicated to him.

- Merong offerer, agent.


- Agent are extension of the personality of the principal.
- If meron kang inauthorize na person na mag communicate or made the offer to
- Offer daw is considered as accepted from the time nayung acceptance was communicated to the
agent.
- When referring to the HIM ayan ay yung agent
- General rule is when making an offer yung acceptance kailangan may communicate yun sayona
nag offer kasi kung wala ay hindi pa yun nagkakaroon ng consent.

ART. 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency
of either party is conveyed.

- Mawawalan ng bisa ang offer from the time na may death, civil interdiction, insanity, or
insolvency of either party before acceptance is conveyed.
- If prior to acceptance, namatay, nagkaron ng civil interdiction, insanity, insolvency
- Civil interdiction is an accessory penalty in criminal law mawawalan ng certain rights. Usually,
kasi kapag may taong Nakagawa ng krimen and he is found guilty on that may mga specific
crimes, specific penalty and access or like life imprisonment or death penalty.
- If may nangyari before the acceptance is conveyed ibig sabihin magiging ineffective at wala
nang chance magkaroon pa ng consent kasi patay nayung isang party.

Art. 1324. When the offerer has allowed the offeree a certain period to accept, the offer may be
withdrawn at any time before acceptance by communicating such withdrawal, except when the
option is founded upon a consideration, as something paid or promised.

- Yung offer ay pwede naming mawithdraw any time before yung acceptanceni offeree kung
papaano iwithdraw ang offer. It is simple as communicating such.
- Hindi ka na interesado at willing to sell ng ibebenta mo
- Hindi siya absolute, meron din syang exception.

Option Contract – within which to accept the offer


Option Money – it is the money paid or promised before the option. Not form part of price.
Earnest Money – that will constitute or will form part with the whole purchase price.

ART. 1325. Unless it appears otherwise, business advertisements of things for sale are not definite
offers, but mere invitations to make an offer.

- It speaks about the business advertisements.


- If you will be asked kung yung business advertisements ba ay definite offers ang sagot ay
depende. One, if it appear to be a definite offer containing all the specific particulars needed in a
contract then it is really a definite offer.
- If it does not appear to be a definite offer then it is just a mere invitation to make an offer.
- Malalaman daw kapag definite offer if all the specific particulars needed in contract ay nandon
na. Kapag broad naman that is just a mere invitation to make an offer.

Definite Offer:
For sale: 100 Square Meters Lot with 2-storey house located at 123, ABC St., Malate, Manila for
Php 10,000,000.00 cash.
Mere Invitation to Make an Offer:
For sale: 100 Square Meters Lot, at 10 million to 20 million a lot at 123, ABC St., Malate,
Manila.

Art. 1326. Advertisements for bidders are simply invitations to make proposals, and the advertiser
is not bound to accept the highest or lowest bidder, unless the contrary appears.

- Yung mga advertisements for bidder daw generally are not definite offers. So, when you say na
hindi sila definite offers then meaning they are just simply as invitation to make proposals.
- In reality, yung talagang gunagawa ng offer ay yung mga bidders, yung nag aadvertise, they are
justinviting bidders to make proposals.
- The advertiser is free to accept or to reject kasi hindi naman sya definite offer.
- Para magkaron ng contract kailangan iaccept ni advertiseryung proposal or offer nung bidder.
- Most advertisements are simply invitations to make an offer and are not offer in themselves.
Since not all the necessary terms can fit in that advertisement.
- General rule, human advertisement talaga are mere invitations unless the contrary appears.

Example:
S sells at a public auction a specific land. The starting bidding is P1,000,000. A placed a P1,100,000 bid;
B placed P1,150,000; and C place P1,300,000.
- Hindi automatically magkakaroon ng contract between S and C. In this case, mayroon pang
option si S na tanggihan ang offer ni C.
- Nakasalalay kay S kung kaninong offer ang tatanggapin nya. Normally, in auction, it is granted
to the highest bidder.

ART. 1327. The following cannot give consent to a contract:


(1) Unemancipated minors;
(2) Insane or demented persons, and deaf-mutes who do not know how to write.

- This talks about the capacity of a person to enter into a contract or to give a consent.
- Unemancipated minor
- Insane or demented person: unless they acted during lucid intervals soi they have the capacity to
give consent at that time so malamang valid ang contract nila.
- Deaf mutes who do not know how to read and write: they are not capable of understanding
things unless they can read and write
- The reason for disqualifying them or for making them incapable of giving consent dahil yun sa
situation nila.
- They are presumed that they are not yet or they are still unable to take care of themselves fully
- Contracts who are entered into by a person who are incapacitated person to give consent are
voidable.
- Merong dalawang uri ng voidable contracts: first is yung one party are incapacitated to give
consent second is yung consent ng kabilang party is vshaped or merong errors, fraud, violence,
intimidation or may influence na nangyari.

Consent
2. The contracting parties must possess the necessary legal capacity. (Arts. 1327-1329)
Two Kinds of Incapacity
1. Absolute Incapacity/Absolutely Incapacitated:
a. Unemancipated minors
o Except for contracts involving necessary
o Where minor misrepresented his age
b. Insane or demented person
o Lucid interval
c. Deaf mutes who do not know how to write
2. Relative Incapacity/Relatively Incapacitated
a. Those under Civil Interdiction for transactions inter vivos (RPC Art. 34)
b. Undischarged insolvents (Insolvency Law, Sec. 24)
c. Husband and wife: cannot donate (Art. 123 FC) to each other, nor sell if the marriage is
under ACP (Art. 1490)

ART. 1328. Contracts entered into during a lucid interval are valid. Contracts agreed to in a state
of drunkenness or during a hypnotic spell are voidable.

- Also talks about some situation kung saan voidable contracts pa rin.

Effect of drunkenness and hypnotic spell.


Drunkenness and hypnotic spell impair the capacity of a person to give intelligent consent. (8
Manresa 660-661.)
These conditions are equivalent to temporary insanity. Hence, the law considers a contract
entered into in a state of drunkenness or during a hypnotic spell voidable, and it is not required that such
state was procured by the circumvention of the other party.

ART. 1329. The incapacity declared in Article 1327 is subject to the modifications determined by
law, and is understood to be without prejudice to special disqualifications established in the laws.

- Talks about modification, incapacity. Sinasabi nya dito na yung incapacity as declared in article
1327 ay pwede naman syang mamodify subject to modifications determined by law.
- Kasi may mga instances din naman although they are incapacitated they can still enter into a
contract or a valid contract.

ART. 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.
- Two classes of voidable contracts: first is yung person or one of the parties is incapacitated to
give consent, second is with the vices of consent
- In order that a consent may be valid for purposes of a contract kailangan hindi lang sya basta nag
exist kumabaga.
- This also enumerates cause for a viscated consent
- Voidable contract is binding and valid unless annulled – through proper action.

Requisites
1. Consent must be intelligently given. – dapat yung nagbibigay ng consent has the capacity to act,
to give that consent.
2. Consent must be free and voluntary. – Hindi pinilit, walang violence at intimidation
3. Consent must be conscious or spontaneous. – Meaning walang viscation ng consent. Dapat yung
consent ay hindi binigay by mistake, by fraud, by undue influence.

Consent
3. It must be intelligent, free, spontaneous, and real (not vitiated) (Art. 1330-1346)

Vices of Consent:
VICES – IMMORAL OR WICKED BEHAVIOR
- Means the other causes that vitiate consent or render it defective so as to make the contract
voidable.
 Violence – there is physical force, external force, hinihit ang physical
Example:
An example would be threatening to harm someone's family if they refused to sign a contract. If a
wrongful or illegal threatened act takes place, that qualifies as duress.

 Intimidation – no physical force however, merong pagbabanta, internal force, fear, hinihit ang
mental
Example:
"There is intimidation when one of the contracting parties is compelled by a reasonable and well-
grounded fear of an imminent and grave evil upon his person or property, or upon the person or property
of his spouse, descendants or ascendants, to give his consent.

 Mistake – it’s very substantial wherein kung alam mo sana na may mistake hindi mo papasukan
yung kontrata, hindi sinasadya
Example:
For example, suppose that the contract states that a shipment of "plates" is to be delivered. Here, the
contract is referring to paper plates, but if one party believes it to be ceramic plates, it could be a mistake
of fact. In many cases, a mistake of fact can result in the contract being voided.

 Fraud – panloloko. Fraud in obtaining consent and fraud in obtaining consent.


Causal Fraud or Dolo Causante - Causal fraud may be committed through insidious words or
machinations (Art. 1338.) or by concealment. (Art. 1339.)
Incidental Fraud or Dolo Incidente – it must not be serious in character
 Undue Influence - when an individual is able to persuade another's decisions due to the
relationship between the two parties, impliedly.
Example:
An example of actual undue influence includes one party threatening to end a relationship with the other
unless they enter a specified contract. Another example may include one party constantly pestering and
threatening to only stop if the other enters a specific transaction.

SECTION 2. — Object of Contracts

ART. 1347. All things which are not outside the commerce of men, including future things, may be
the object of a contract. All rights which are not intransmissible may also be the object of
contracts.
No contract may be entered into upon future inheritance except in cases expressly
authorized by law.
All services which are not contrary to law, morals, good customs, public order or public
policy may likewise be the object of a contract. (1271a)

- Lahat talaga, all things kahit future things pwedeng maging object ng contract bast yung
qualifications ay hindi daw outside the commerce of men.
- All rights na intransmissible pwede ring maging object ng contract.
- All services na hindi kumokontra s amga sumusunod ay pwede ding maging object ng contract.
- Yung future inheritance as general rule, hindi talaga sya pwedeng maging object ng contract,
although mayroong iba na inallow ng batas.

ART. 1348. Impossible things or services cannot be the object of contracts. (1272)

- Object of the contract must not be impossible either physically impossible or legally impossible.

Concept of object of a contract.


The object of a contract is its subject matter. (Art. 1318[2].) In reality, the object of every
contract is the obligation created. But since a contract cannot exist without an obligation, it may be said
that the thing, service, or right which is the object of the obligation is also the object of the contract. (2
Castan 9.)

Kinds of object of contract.


Object certain is the second essential element of a valid contract. (Ibid.) The object may be
things (as in sale of property), rights (as in assignment of credit), or services (as in agency).

Requisites of things as object of contract.


In order that things may be the object of a contract, the following requisites must be present:
(1) The thing must be within the commerce of men, that is, it can legally be the subject of
commercial transaction
- Ano ba yung mga outside ng commerce ng men? Yung sidewalks, parks, personal
rights, status and capacity of person, honorary title and distinction
(2) It must not be impossible, legally or physically (Art. 1348.);
(3) It must be in existence or capable of coming into existence (see Arts. 1461, 1493, 1494.); and
(4) It must be determinate or determinable without the need of a new contract between the
parties.

Requisites of services as object of contract.


In order that service may be the object of a contract, the following requisites must concur:
(1) The service must be within the commerce of men;
- Ano ba yung mga outside ng commerce ng men? Yung sidewalks, parks, personal rights,
status and capacity of person, honorary title and distinction
(2) It must not be impossible, physically or legally (Art. 1348.); and
(3) It must be determinate or capable of being made determinate. (Arts. 1318[2], 1349.)

Rights as object of contract.


As a general rule, all rights may be the object of a contract. The exceptions are when they are
intransmissible by their nature, or by stipulation, or by provision of law.

(1) Outside the commerce of men. — Things of public ownership such as sidewalks, public places,
bridges, streets, etc.; things that are common to everybody such as air, sunlight, rain, etc.
(2) Impossible, physically or legally. — Prohibited drugs and all illicit objects; to kill a person, etc.
(illicit things or services are also outside the commerce of men.); to get soil from planet Jupiter; to
construct a building in one day; etc.
(3) Determinable things. — All the cavans of rice in a warehouse; all the eggs in a basket; my land with
the smallest area; the land at the corner of a particular street; etc.
(4) Future things or rights. — Things to be manufactured, raised, or acquired after the perfection of the
contract such as wine that a vineyard is expected to produce; wool that shall thereafter grow upon a
sheep; rice to be harvested next harvesting season; milk that a cow may yield; eggs that hens may lay;
young animals not yet in existence, etc.
(5) Intransmissible rights. — Political rights such as the right to vote; family, marital, and parental
rights; right to public office, or to run for public office, etc.

Meaning of future inheritance.


Future inheritance is any property or right, not in existence or capable of determination at the
time of the contract, that a person may inherit in the future.

- General Rule: it cannot be an object of contract


- Exception: when expressly allowed by law
- Pag yung parents mo ay buhay pa hindi mo pa pwedeng ibenta ang iyong mamanahin.
- Note that yung inheritance ceases to be future upon the death of the decedent.
- Pag namatay yung parents mo, hindi na siya future inheritance kahit pa hindi nyo pa nadidivide
or nadedetermine kung saang parte ang syao, pwedde na syang actually maging object of
contract.

Requisites of inheritance to be considered future.


A contract may be classified as a contract upon future inheritance where the following requisites
concur:
(1) The succession has not yet been opened at the time of the contract;
(2) The object of the contract forms part of the inheritance; and
(3) The promissor has, with respect to the object, an expectancy of a right which is purely
hereditary in nature.

Kinds of impossibility.
Impossibility may be:
(1) Physical. — when the thing or service in the very nature of things cannot exist (e.g., a
monkey that talks) or be performed. With particular reference to services (see Arts. 1266, 1267.), the
impossibility may be:
- Malabo talaga siyang mangyari.
(a) Absolute. — when the act cannot be done in any case so that nobody can perform it
(e.g., to fl y like a bird, etc.); or
- Kapag no one can do it talaga kahit sino pa man ay hindi.
(b) Relative. — when it arises from the special circumstances of the case (e.g., to make
payment to a dead person, to drive a car on flooded highways, etc.) or the special conditions or
qualifications of the obligor (to paint a portrait by a blind person, etc.); or
- Pwede sa ibang circumstance and then hindi pwede sa iba.
(2) Legal. — when the thing or service is contrary to law, morals, good customs, public order, or
public policy. An act is contrary to law, either because it is forbidden by penal law (e.g., to sell
prohibited drugs, etc.) or a rule of law makes it impossible to be done (e.g., to make a valid donation of
real property without a public instrument [Art. 749.], to make a valid will, where the testator is under 18
years of age [Art. 797.], etc.).
- Batas ang nagbawal

Effect of physical impossibility on validity of contract.


(1) The absolute impossibility nullifies the contract.
(2) The relative impossibility, if temporary, does not nullify the contract, such as when a partner
agrees to contribute to the partnership an amount more than is permissible by his means; if permanent, it
annuls the contract, such as blindness in contracts which require the use of eyesight. (8 Manresa 685.)

ART. 1349. The object of every contract must be determinate as to its kind. The fact that the
quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is
possible to determine the same, without the need of a new contract between the parties. (1273)

- Object of the contract must be determinate or at least be determinable without the need of new
agreement. Kasi kapag kailangan pa ng panibagong agreement in order to determine the object of
the contract thenmeaning it is an indeterminate in object. So, the contract is void.
- Simply because, sabi nga ni art 1318, para magkaroon ng valid contract, may tatlong essential
requisites, the COC.
- Kung indeterminate ang object of the contract, meaning hindi madetermine. Thus, kulang ng
essential requisites and so void ang contract.

Quantity of object of contract need not be determinate.


The object of a contract must be determinate as to its kind or at least determinable without the
necessity of a new or further agreement between the parties. It need not be specified with absolute
certainty. The same is true of the quantity of the object of the contract. It is sufficient that it is possible
to determine the same without the need of a new contract between the parties.
When the obligation consists in the delivery of a generic thing, whose quality and circumstances
have not been stated, Article 1246 governs.

SECTION 3. — Cause of Contracts

ART. 1350. In onerous contracts the cause is understood to be, for each contracting party, the
prestation or promise of a thing or service by the other; in remuneratory ones, the service or
benefit which is remunerated; and in contracts of pure beneficence, the mere liberality of the
benefactor. (1274)

- Kung idedefine mo si cause, iisipin lang natin, eto yung reason kung bakit moba iaassume ang
obligation nay an. For example sa contract of sale, bakit moba idedeliver ang lupa? Anong
cause? Malamang kailangan mo ng pera. On the other party naman, bakit siya magbabayad ng
pera? Malamang kailangan niya ng lupa.
- Yung difference ng cause at ng subject matter is only a matter of view point in some ways kasi
yung subject matter for one party will be the cause or consideration for the other party. Although,
in another school of thought, sinasabi din nila na yung cause halimbawa kanina yung sa sale ng
lupayung cause ng seller is yung pera ng buyer at sa cause naman ng buyer is yung lupa ng
seller. As to both parties now, the subject matter is always lupa.
- Art. 1350 provides for the classification of contracts according to cause,
Meaning of cause.
Cause (causa) is the essential or more proximate purpose or reason which the contracting parties
have in view at the time of entering into the contract (see 8 Manresa 697; Republic vs. Cloribel, 36
SCRA 534 [1970].) or, as expressed in another case, it is the “why of the contract, the essential reason
which moves the contracting parties to enter into the contract.’’ (Gonzales vs. Trinidad, 67 Phil. 682
[1939]; Villamor vs. Court of Appeals, 202 SCRA 607 [1991]; Domingo vs. Court of Appeals, 367
SCRA 368 [2001].)
It is the Civil Code term for consideration in Anglo-American or common law.

Cause distinguished from object.


In a bilateral or reciprocal contract like purchase and sale, the cause for one is the subject matter
or object for the other, and vice versa. Hence, the distinction is only a matter of viewpoint.

Classification of contracts according to cause.


They are:
(1) Onerous or one the cause of which, for each contracting party, is the prestation or promise of
a thing or service by the other. In other words, in this contract, the parties are reciprocally obligated to
each other.
- Both have obligations. They are reciprocally obligated to each other. The best example
is the contract of sale.
(2) Remuneratory or remunerative or one the cause of which is the service or benefit which is
remunerated. The purpose of the contract is to reward the service that had been previously rendered by
the party renumerated; and
- Those contracts for the past service or benefit na na-render. So yung purpose ng contract is to
reward the service that has been previously rendered. Example is If B has rendered a service to C as
defense counsel who agreed to pay B an amount of P100,000 for the said service, then yung object is
yung P100,000 tapos yung cause is yung services or yung service na pinerform ni B in favor to C as a
defense counsel.
(3) Gratuitous or one the cause of which is the mere liberality of the benefactor or giver, such as
commodatum; pure donation; guaranty or suretyship unless there is a stipulation to the contrary (Art.
2048.), mortgage given by a third person to secure an obligation of a debtor (see Art. 2085, last par.)
unless a consideration is paid for such mortgage.
- Example here is the donation. Yung liberality ng giver, yung yung cause of the contracts.

ART. 1351. The particular motives of the parties in entering into a contract are different from the
cause thereof. (n)

- Iba raw ang motive at cause of the contract kasi yung motive is purely personal or private sa
isang contracting parties. It validiy or invalidity has nothing to do with the validity or invalidity
of the cause or consideration
- Example of motive: P buy a gun to kill G worth P100,000. Dito, the cause of the contract is yung
gun as part of the P and yung pera as part of the seller. Yung motive ay to kill G

Meaning of motive.
Motive is the purely personal or private reason which a party has in entering into a contract. It is
different from the cause of the contract. Article 1351 embodies “a principle which is common to both
Philippine law and American jurisprudence.” (Report of the Code Commission, p. 137.)

Motive Vs. Cause


1. Motive may vary while cause is always the same.
- The cause is always the same pero yung motive iba iba.
2. Illegal cause makes the contract void but the illegal motive does not necessary render the
contract void.

Cause distinguished from motive.


As contradistinguished from consideration or cause, motive has been defi ned as the condition of
mind which incites to action, but includes also the inference as to the existence of such condition from
an external fact of a nature to produce such a condition. (Olegario vs. Court of Appeals, 238 SCRA 96
[1994].)
The differences are as follows:
(1) Cause is the immediate or direct reason, while motive is the remote or indirect reason;
(2) Cause is always known to the other contracting party, while motive may be unknown;
(3) Cause is an essential element of a contract, while motive is not; and
(4) The illegality of the cause affects the validity of a contract, while the illegality of one’s
motive does not render the contract void.
In other words, cause is the essential reason which moves the contracting parties to enter into it
and justifies the creation of an obligation through their will. While cause is the essential reason for the
contract, motive is the particular reason of a contracting party which does not affect the other party. (Uy
vs. Court of Appeals, 314 SCRA 69 [1999].)

When motive regarded as cause.


As a general principle, the motive or particular purpose of a party in entering into a contract does
not affect the validity nor existence of the contract. (Phil. National Construction Corp. vs. Court of
Appeals, 272 SCRA 183 [1997].)
Under certain circumstances, the motive may be considered the cause in a contract when such
motive predetermines the cause of the contract (Liguez vs. Court of Appeals, supra; Republic vs.
Cloribel, 36 SCRA 534 [1970].), i.e., it is made the condition for the effi cacy of the contract, or is
founded on a fraudulent purpose to prejudice third persons. When they blend to that degree, and the
motive is unlawful, then the contract entered into is null and void under Article 1352. (see Olegario vs.
Court of Appeals, supra.)

ART. 1352. Contracts without cause, or with unlawful cause, produce no effect whatever. The
cause is unlawful if it is contrary to law, morals, good customs, public order or public policy.
(1275a)

- Pag wala naman talagang cause that contract is void and so it would really produceno effect.

Requisites of cause.
The following are the requisites of cause:
(1) It must exist at the time the contract is entered into (Arts. 1352, 1409[3].);
- Dapat mayroon kasi kung walang cause then kulang yung essential requisites ng contract
which is COC.
(2) It must be lawful (Ibid.); and
- Lawful pag hindi siya contrary to law, morals, good customs, public order or public policy.
(3) It must be true or real. (Art. 1353.)

Effect of absence of cause.


Absence or want of cause means that there is a total lack of any valid consideration for the
contract. (see Garanciang vs. Garanciang, 28 SCRA 229 [1969].)
(1) Statement in contract of a non-existent cause. — Contracts without cause confer no right and
produce no legal effect whatever. Thus, a contract which is absolutely simulated or fi ctitious is
inexistent and void. (Arts. 1346, 1409[3].) Where there is, in fact, no consideration, the statement of one
in the contract will not suffice to bring it under the rule of Article 1353 as stating a false consideration.
(Mapalo vs. Mapalo, 17 SCRA 114 [1966].)
A contract of sale, for example, is void if the price is simulated, but the act may be shown to
have been in reality a donation or some other act or contract. (Art. 1471.)
(2) Grant of right of first refusal. — It is not correct to say that there is no consideration for the
grant of the right of first refusal if such grant is embodied in the same contract of lease. Since the
stipulation forms part of the entire lease contract the consideration for the lease includes the
consideration for the grant of the right of fi rst refusal. In entering into the contract, the lessee is, in
effect, stating that it consents to lease the premises and to pay the price agreed upon provided the lessor
also consents that should the lessor sell the leased property, then, the lessee shall be given the right to
match the offered price and to buy the property at that price. In other words, the rent paid by the lessee
constitutes sufficient consideration for the grant of a right of fi rst refusal. (Equitorial Realty
Development, Inc. vs. Mayfair Theater, Inc., 264 SCRA 483 [1996]; Lucrative Realty Development
Corporation vs. Bernabe, Jr., 392 SCRA 679 [2002].)

Effect of failure of cause.


Absence of cause should be distinguished from inadequacy of cause which, as a general rule, is
not a ground for relief (see Art. 1355.), and from failure of cause which does not render a contract void.
(see Arts. 1169, par. 3; 1170, 1191.)
(1) The failure to pay the stipulated price after the execution of a contract of sale does not
convert the contract into one without cause or consideration, it not being essential to the existence of
cause that payment or full payment be made at the time of the contract. (Puato vs. Mendoza, 64 Phil.
417 [1937]; Catangcatang vs. Legayada, 84 SCRA 51 [1978].) Neither is a deed of sale with a right of
repurchase rendered void by the dishonor of the checks that were issued for the redemption of the
properties involved by the drawee bank for having been drawn against a closed account. (Mate vs. Court
of Appeals, 290 SCRA 463 [1998].)
But a contract of sale is null and void for being without cause (Art. 1409[3].) where the purchase
price, which appears thereon as paid (e.g., where the deed of sale states: that I [seller] for and in
consideration of P50,000, to me in hand paid by B [buyer] receipt of which is hereby acknowledged) has
in fact never been paid by the buyer to the seller. (Mapalo vs. Mapalo, 17 SCRA 114 [1966].) This is not
merely a case of failure to pay the purchase price which can only amount to a breach of obligation with
rescission as the proper remedy. There is a purported contract that lacks a cause — one of the three
essential requisites of a valid contract.
Failure to pay the consideration is different from lack of consideration. The former results in a
right to demand the fulfillment or cancellation of the obligation under an existing valid contract while
the latter prevents the existence of a valid contract. (Montecillo vs. Reynes, 385 SCRA 244 [2002];
Macasaet vs. R. Transport Corporation, 535 SCRA 503 [2007].)
(2) Where a lending bank took over the management of the borrowing corporation, as one of the
conditions for the granting of the loan, and the corporation was led to bankruptcy thru mismanagement
and misappropriation of funds, thereby defeating the very purpose of the loan, it is as if the loan was
never delivered and thus, there was a failure of consideration on the part of the bank.4 (Rosa Packing
Corp., Inc. vs. Court of Appeals, 167 SCRA 309 [1988].)
(3) Where the records do not show the total costs of the condominium units in question and the
payment schemes therefor, and the fi gures referred to by the buyers as prices are mere estimates given
to them by the seller of the rights to said units, the transactions lack the requisites essential for the
perfection of contracts. (Raet vs. Court of Appeals, 295 SCRA 677 [1998].)

Effect of illegality of cause.


Illegality of cause implies that there is a cause but the same is unlawful or illegal.
The cause is unlawful if it is contrary to law, morals, good customs public order, or public
policy. (see Art. 1306.) Contracts with unlawful cause are also null and void. (Arts. 1353, 1409[1]; see
Arts. 1411, 1412, 1414, 1416-1422.)
(1) A promise of marriage based upon carnal connection is founded on an unlawful cause and,
therefore, void and no action can be maintained by the woman against the man therefor. (Batarra vs.
Marcos, 7 Phil. 156 [1906].)
(2) A proscription against sale of property between spouses applies even to common law
relationships (Calimlim-Canullas vs. Fortun, 129 SCRA 675 [1984].) The sale made by a husband in
favor of concubine after he had abandoned his family and left the conjugal home is null and void, being
subversive of the stability of the family which public policy cherishes and protects. (Ching vs. Goyanko,
Jr., 506 SCRA 735 [2006].)
(3) A contract whereby a person accused of a crime obliges himself to give a sum of money in
consideration of the promise on the part of the obligee to refrain from testifying against him is void
because the purpose is to stifl e criminal prosecution and this is against public policy. (Velez vs. Ramas,
40 Phil. 787 [1920]; Arroyo vs. Bernin, 36 Phil. 386 [1917].)
(4) A promissory note is void ab initio and no cause of action for collection can arise from it
where the consideration for it is to infl uence public offi cers in the performance of their duties which is
contrary to law and public policy. (Pineda vs. De la Rama, 121 SCRA 671 [1983]; see Arts. 1306,
1412[1].)

ART. 1353. 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. (1276)

- This provision talks about the effects kung yung cause na nasa contract ay false. Yung cause
means valid pero hindi siya yung totoong cause.
- Yung contract ay nagiging void pag hindi na prove ng parties thet it is founded upon another
cause which is true and lawful. Meaning kailangan ding iprove nayun ay true. Kumbaga yung
totoong tinago nyong cause dapat ay lawful din siya,
- If the parties can show that there is really another cause and that cause is true and lawful then the
parties shall be bound by their true agreement.
- Kapag founded that there is a false cause, then the contract is void.
- Example: Si P and G ay gumawa ng contract of sale with respect doon sa sasakyan ni P. Doon
sa kontrata, sa deed of saleay nakalagay na contract price and stating P100,000 for the car of P.
However, yung totoo ay wala talaga kasi ginawa lang naman nila yun to defraud the other
creditors of P. Baka kasi kunin, iattach yung kanyang sasakyan pambayad eh ayaw nya yun
ibayad so gumawa sila ng kontrata ni G that he actually sold the car already to G. Since wala
yung contract actually in truth ay false yung cause don dahil wala naman talagang binayad o
binigay nap era.
- Howvere, if in truth the car was delivered to G as payment for her previous service.

Effect of falsity of cause.


By falsity of cause is meant that the contract states a valid consideration but such statement is not
true.
A false cause may be erroneous or simulated. The first always produces the inexistence of a
contract. If the cause is false, the contract is rendered void because the same actually does not exist.
(Arts. 1353, 1409[3].) The second does not always produce this effect, because it may happen that the
hidden but true cause is sufficient to support the contract. If the parties can show that there is another
cause and that said cause is true and lawful, then the parties shall be bound by their true agreement. (Art.
1346.)

ART. 1354. Although the cause is not stated in the contract, it is presumed that it exists and is
lawful, unless the debtor proves the contrary. (1277)

- Its provides for a presumptionna nag eexist and that yung cause is lawful. Meaning hindi naman
talaga necessary na yung cause be expressly stated in the contract, pwede siyang hindi mailagay
kasi pinepresumed sya ng batas na lahat ng contract ay mayroong corresponding cause which is
lawful. But then, since presumption lang naman siya the pwede pa din naming iprove otherwise.
Pwedeng mag show ng proof na wala talagang cause or yung cause na totoo na hindi nakasaad
jan is unlawful.
- Cause presumed to exist and lawful.
- It is necessary that the cause must exist but it is not necessary tp tstae the cause in the contract
kasi the cause is presumed to exist and lawful.

Cause presumed to exist and lawful.


It is not necessary that the cause be expressly stated in the contract. The presumption is that the
cause exists and is lawful unless the debtor proves the contrary. (Zayco vs. Serra, 44 Phil. 326 [1923];
Lim vs. LimChu Kao, 51 Phil. 476 [1928]; Papa and Delgado vs. Montenegro, 54 Phil. 331 [1930].)
This presumption is in accord with the natural order of things. Ordinarily, a person will not part
with his property unless there is a consideration. It is only prima facie and must yield to contrary
evidence. (Castro vs. Escutin, 90 SCRA 349 [1979]; San Luis vs. Negrete, 98 SCRA 82 [1980]; see Ong
vs. Ong, 139 SCRA 133 [1985].) The presumption that a contract has a suffi cient consideration cannot
be overthrown by a mere assertion that it has no consideration. (Fernandez vs. Fernandez, 153 SCAD
787, 363 SCRA 811 [2001].) To overcome the presumption, the alleged lack of consideration must be
shown by preponderance of evidence. (Saguid vs. Security Finance, Inc., 477 SCRA 256 [2006]; Surtida
vs. Rural Bank of Malinao, 511 SCRA 507 [2006].)

ART. 1355. Except in cases specified by law, lesion or inadequacy of cause shall not invalidate a
contract, unless there has been fraud, mistake or undue influence. (n)

- General rule: lesion or inadequacy of price does not invalidate a contract. Hindi porket ay
napakamurang binenta ay invalidate na kaagad. Yung exception is kapag merong fraud, mistake,
or undue influence.
- Aside from the fact na inadequate nga yung price for the contract, meron pang fraud, mistake, or
undue influence. Kapag merong ganon, that is the time that it is not valid.

Meaning of lesion.
Lesion is any damage caused by the fact that the price is unjust or inadequate. (8 Manresa 740.)
It is the injury suffered in consequence of inequality of situation, by one party who does not
receive the full equivalent for what he gives in a commutative contract, like a sale. (Bouvier’s Law
Dictionary, p. 1929.)
- Lesion means inadequacy of cause.

Effect of lesion or inadequacy of cause.


(1) General rule. — Lesion or inadequacy of cause (e.g., price of thing sold) does not of itself
invalidate a contract. (Ereñeta vs. Bezore, 54 SCRA 13 [1973].) The general rule is that a party to a
contract will not be relieved from his obligation under it by the mere fact that the contract may turn out
to be financially disadvantageous to him. The reason for this rule is explained by the Supreme Court this
wise:
“All men are presumed to be sane and normal and subject to be moved by substantially the same
motives. When of age and sane they must take care of themselves. In their relations with others in the
business of life, wits, sense, intelligence, training, ability, and judgment meet and clash and contest
sometimes with gain and advantage to all, sometimes to a few only with loss and injury to others. In
these contests, men must depend upon themselves — upon their own abilities, talents, training, sense,
acumen, judgment.
The fact that one may be worsted by another, of itself furnishes no cause of complaint. One man
cannot complain because another is more able or better trained, or has a better sense of judgment than he
had. And when the two meet on a fair fi eld, the inferior cannot murmur if the battle goes against him.
The law furnishes no protection to the inferior simply because he is inferior, any more than it protects
the strong because he is strong. It furnishes protection to both alike, to one no more than to the other. It
makes no distinction between the wise and the foolish, the great and the small, the strong and the weak.
The foolish may lose all they have to the wise, but that does not mean that the law will give it back to
them again.
Courts cannot follow every step of one’s life and extricate him from bad bargains, protect him
from unwise investments, relieve him from one-sided contracts, or annul the effects of foolish acts.
Courts cannot constitute themselves guardians of everyone. Courts operate not because one person has
been defeated or overcome by another, but because he had been defeated or overcome illegally. Man
may do foolish things, make ridiculous contracts, use miserable judgments, and lose money on them —
indeed all they have in the world but not for that alone can the law intervene and restore. There must be,
in addition, a violation of law, the commission of what the law knows as an actionable wrong before the
courts are authorized to lay hold of the situation and remedy it.” (Vales vs. Villa, 35 Phil. 769 [1916];
see Cebu Portland Cement Co. vs. Dumon, 61 SCRA 218 [1974]; Philippine Aluminum Wheels, Inc. vs.
FASGI Enterprises, Inc., 342 SCRA 722 [2000].)
Note: This ruling should be deemed modified by Article 1267, a new provision, which authorizes
a court to release an obligor from an obligation, in whole or in part, when performance thereof has
become so difficult as to be manifestly beyond the contemplation of the parties. Inadequacy of price is
of no moment where the judgment debtor has a right to redeem.
(2) Exceptions. — Lesion will invalidate a contract —
(a) when there has been fraud, mistake, or undue influence (Art. 1355.); and
(b) in cases specified by law. (see Art. 1381.) The rule in Article 1355 “is a general principle of
modern law. The exceptions are self-evident.” (Report of the Code Commission, p. 137.)
(3) Related provisions. — The following provisions of law are pertinent:
“Art. 1098. Art. 1470. Art. 1539. Art. 1542. Art 1602.
(4) Filial love or affection. — In a case, the Supreme Court did “not fi nd the stipulated price as
so inadequate to shock the court’s conscience considering that the price paid was much higher than the
assessed value of the subject properties and considering that the sales were effected by a father to her
daughter in which case fi lial love must be taken into account.” (Alsua Betts vs. Court of Appeals, 92
SCRA 332 [1970].)
Affection may be included as a portion of the consideration. (Dy vs. Sacay, 165 SCRA 473
[1988].) A valuable consideration, however small and nominal if given or stipulated in good faith is, in
the absence of fraud, suffi cient. (Rodriguez vs. Court of Appeals, 207 SCRA 553 [1992]; Penaco vs.
Ruaya, 110 SCRA 46 [1981]; Ascalon vs. Court of Appeals, 158 SCRA 542 [1988].)

Simulation of contract and gross inadequacy of price distinct concepts.


Simulation of contract (Arts. 1345, 1346) and gross inadequacy of price are distinct legal
concepts, with different effects. When the parties to an alleged contract do not really intend to be bound
by it, the contract is simulated and void. A simulated or fictitious contract has no legal effect whatsoever
(see Arts. 1352, 1409[2].) because there is no real agreement between the parties.
In contrast, a contract with inadequate consideration may nevertheless embody a true agreement
between the parties. A contract of sale is a consensual contract, which becomes valid and binding upon
the meeting of minds of the parties on the price and the object of the sale. The concept of a simulated
sale is thus incompatible with inadequacy of price. When the parties agree on a price as the actual
consideration, the sale is not simulated despite the inadequacy of the price. (Bravo-Guerrero vs. Bravo,
465 SCRA 244 [2005].)

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