STA.

MARIA NOTES WITHDRAWAL - effective immediately after its

manifestation: mailing
CHAPTER 2: ESSENTIAL ELEMENTS OF
CONTRACTS Policitacion (imperfect promise) - merely an offer

ART. 1318: ESSENTIAL ELEMENTS Public advertisements / solicitation - invitation to

make an offer; proposal
COC - consent, object, cause
 Both are not considered binding
 All must be present; absence of 1 negates the
existence of contract CASE - Spouses v PNB: parties must agree at the
same thing in the same sense, so that their minds
Inexistent contract - no effect meet.
 Can be invoked by any person if it is asserted  Distinct intention common to both; no doubt
against him
 Uncertainty, indefiniteness, future negotiations
Accion Reinvindicatoria - recovery of the object
or considerations - not a completed contract
matter by transferor
CASE - Salonga v Farrales: No acceptance, no
 Possessor may refuse to deliver it to the concurrence of the wills, no consent to form a
transferee, who cannot enforce the transfer contract
2 TYPES OF VOID CONTRACT (NP PL)
 Contract to sell – bilateral
1. One of the elements is not present  merely an offer without acceptance - no
consent
2. Conveyances by virtue of a forged  Essence of consent: CONFORMITY
document
ACCEPTANCE
a. Void ab initio
CASE - Adelfa v CA: Acceptance must be absolute.
b. Contracts prohibited by law
 Expressed or implied (ACW)
i. Art. 1409 of NCC
ii. Object is beyond the 1. Acts
human commerce 2. Conducts
3. Words of a party recognizing the existence
Rule on pari delicto (in equal default) - does not of the contract
apply on inexistent contracts or absolutely simulated
contracts Rule: Acceptance must be:

Good faith - not an essential element  Affirmatively and clearly made

 Evidenced with some acts or conducts
 Immaterial in determining the validity of a communicated to the offeror
contract
 Formal or informal manner
 No amount of good faith can validate an  Manifests a present intention or determination
agreement to accept the offer

ART. 1319 & ART. 1320: CONSENT & REQUISITES OF ACCEPTANCE

ACCEPTANCE
 UNCONDITIONAL
CONSENT - meeting of the offer and acceptance;  UNQUALIFIED - Identical to the terms of the
concurrence of the wills (OA) offer

 Intelligent, Free, Spontaneous and Real o Qualified - counteroffer; must be

OFFER – certain; Manifestation of willingness to
enter into a bargain
 Another’s assent is invited
 Terms should be complete - containing
necessary and intended terms
o Incomplete offer - merely a step
 Empowers prospective buyer to create a
contract
ACCEPTANCE – absolute
 Qualified acceptance = counteroffer
NEGOTIATION - initiated by an offer
 Either of the parties may stop the negotiation -
withdrawal
assented by the original offeror
 Expressed assent - not necessary at every
instance
 Implied acceptance - parties proceeded with
the contract
CASE - Babasa v CA: distinction between a
condition imposed on the PERFECTION of a
contract and merely on the PERFORMANCE OF
THE OBLIGATION
 Failure on the 1st: failure of a contract
 Failure on the 2nd: breach of contract - gives the
other party options and/or remedies to protect
interests
Acceptance made by LETTER OR TELEGRAM -
not binding before it came to the knowledge of the
offeror
CASE - Tan v Planters: if the parties consider
material other stipulations, even though ordinarily not
significant, to arrive at the perfection of a contract,
those must likewise be agreed upon by the parties.
CASE - Magsaysay v CPCC; Leonardo v CA: Area
of agreement (meeting of minds) must extend to
all points that the parties deem material or there is no
consent
ART. 1321: FIXATION OF TIME, PLACE AND
MANNER OF ACCEPTANCE
OFFEROR - can indicate the manner, time and
place of acceptance
 Will not be bound by any acceptance made by
acceptor other than what he specified, unless he
acquiesces in the change
CASE - Malbarosa v CA: contract is perfected only
from the time an acceptance of an offer is made
known to the offeror
 Exclusive manner of acceptance - should be
obeyed by the acceptor
 Any attempt of other acceptance will not bind
the offeror - constitutes a counteroffer which
the offeror can accept or reject
 Offer made inter praesentes (face to face;
physical presence) - must be accepted
immediately
TERMINATION OF A PERFECTED &
FORCEABLE CONTRACT
The termination of the contract when the negotiations
of the parties terminate and the offer and acceptance
concur, is largely a question of fact to be determined
by the trial court.
REVOCATION OR WITHDRAWAL OF AN
OFFER
CASE - Malbarosa v CA: Contract not perfected - if
the offeror revokes or withdraws its offer and the
revocation or withdrawal is the first to reach the
offeree.
 Acceptance after knowledge of revocation –
INEFFICACIOUS
 Acceptor delayed in accepting the offer and
failed to transmit this to the offeror. Offeror
already revoked the offer before the acceptance.
- NO CONTRACT PERFECTED
ACCEPTANCE - if no period has been fixed should
be done immediately
 If delayed, gives an option to the offeror to
withdraw the offer
WITHDRAWAL – immediately effective as long
as acceptance has not reached the offeror
CASE – Matias v CA: even if the parties agreed as to
the object the sale and the purchase price but still has
to agree on the manner of how and when the down
payment and the installments are to be paid, the
contract is not perfected and there is no contract of
sale.
Any uncertainty = contract not perfected
ART. 1322: OFFER MADE THROUGH AN
AGENT
Offer is made through an agent – acceptance can be
communicated to him
Sale of a piece of land or any interest therein –
authority of the agent should be written, otherwise
void.
ART. 1323 SITUATIONS WHEN OFFER
BECOMES INEFFECTIVE
 Death
 Civil interdiction - prohibition of usage of civil
rights
 Insanity
 Insolvency
When before acceptance has come to the actual
knowledge of the offeror, either of the parties faced
the situations above, offer becomes ineffective.
CASE - Villanueva v CA: Bank accepted an offer to
purchase a certain foreclosed property. Offeror did
not receive any notice of approval of his offer. When
he did, the bank was already declared insolvent,
hence, offer becomes ineffective.
No contract = no rights to invoke the board
resolution
ART. 1324: OPTION
DE LEON:
OPTION - binds the offeror not to enter into the
principal contract with any other person during
the period fixed, and, within the period, to enter into
such contract with the offeree if the latter should
decide to use the option. However, the optionee-
offeree may not sue for specific performance on the
proposed contract before it has reached its own stage
of perfection.
 Privilege of optionee-offeree
OPTION CONTRACT - a preparatory contract
giving a person for a consideration a certain period
and under specified conditions within which to accept
the offer of the offeror.
 separate and distinct from the projected
main agreement or principal contract itself
(subject matter of the option) which the parties
may enter into upon the consummation of the
option, or which will be perfected upon the
acceptance of the offer.
 privilege itself given to the offeree to accept an
offer within a certain period.
OPTION PERIOD - period given within which the
offeree must decide whether or not to enter into the
principal contract.
OPTION MONEY - money paid or promised to be
paid as a distinct consideration for an option
contract.
EARNEST MONEY - partial payment of the
purchase price
 considered as proof of the perfection of the
contract. (Art. 1482.)
 presupposes that there is already a sale (or
some other contract) with the buyer bound to
pay the balance.
 The would-be buyer who gives option money is
not required to buy.
ART. 1325: ADVERTISEMENT
ADVERTISEMENT - an invitation for any willing
purchaser to make an offer or to negotiate as to how
he intends to buy a house
“Unless it appears otherwise” - certain offer
ART. 1326: BIDDING
One who bids are not automatically the other party to
the contract.
 Bidding is all about offers
 Proposal
 Only the moment his offer was accepted should
he be the other party
CASE - Davies v CA: dissemination of the “Terms
and Conditions of the Bidding” constitutes an
advertisement to the prospective suppliers to bid in
the project.
 Offer in this case: bid proposals or quotations
submitted by the prospective suppliers
 Acceptance: favorable reply of the company to
one of the prospective suppliers.
ART. 1327: PERSONS WHO CANNOT GIVE
CONSENT TO A CONTRACT
 Unemancipated minors
 Insane or demented persons
 Deaf-mute who does not know how to write
ANY contract entered into by an unemancipated
person - annullable or voidable
 Valid until rendered ineffective by the courts
 Not void ab initio
 Capable persons cannot allege the incapacity of
those whom they contracted with.
 Presumption: the contract has been entered into
by competent persons
 Burden to prove the incapacity of the person
alleged at the time of the perfection of the
contract
3 CLASSIFICATION OF PERSONS SUFFERING
FROM MENTAL INCAPACITY
1. IDIOTS - has been insane from birth
2. LUNATIC - was at one time sane, but who
from some cause or other lost use of his
reason
3. NOT LEGALLY TOTALLY
INCAPACITATED - all forms of mental
weakness which do not render the person
affected totally incapable of transacting
business or managing his affairs
Purpose of provision on handicapped people: to
prevent fraud for the protection of handicapped
people
ART. 1328: LUCID INTERVAL,
DRUNKENNESS, HYPNOTIC SPELL
LUCID INTERVAL – period of time when an
insane person acts on his reasonable
understanding, comprehension, discernment
LUNACY – intermittent in character, so a valid
contract may be entered into during lucid interval
Insane before contract was executed - Presumption:
that condition continued
DRUNKENNESS
Entered into during DRUNKENNESS – undue
advantage was made over the drunken person to gain
his affixation
 Party was incapable of understanding the nature
and effect of the agreement or its consequences
Voidance – option for the intoxicated person
3 INSTANCES WHERE CONTRACT MADE IS
VOIDABLE
1. Appears that the drunkenness was brought
by the other party
2. Fraudulent advantage
3. Drunkenness deprives the party of his
reason of an agreeing mind
 Mere intoxication unmixed with any of the 3
above – groundless
 1 party procures the intoxication to the other to
obtain the contract or conveyance – voidable,
notwithstanding the degree of drunkenness
HYPNOSIS – artificial induced state; exaggerated
suggestibility and continued responsiveness to the
voice of the hypnotist
ART. 1329 & ART. 1330: OTHER GROUNDS
TO ANNUL A CONTRACT (MVIUF)
Entering into a contract – free, voluntary, willful
and with a reasonable understanding of the various
obligations the parties intend to be bound
 Mistake
 Violence
 Intimidation
 Undue influence
 Fraud
o All of these constitutes no real assent
 I,V,UI – acts of duress; coerced party is
compelled to execute the contract against his
will
o + Mistake - Voidable under Art. 1390
ART. 1331: MISTAKE AS A GROUND FOR
ANULLING A CONTRACT
Mistake should be in:
 The substance of the thing – object of the
contract
 Conditions which principally induced parties
to enter into a contract
Unilateral mistake when other party is completely
ignorant of it – won’t affect the agreement or
afford grounds for its avoidance or rescission
 Simple mistake of account – correction
WHEN MISTAKE IS ON THE IDENTITY OF THE
PARTIES
2 REQUISITES
1. With regard to the identity or with regard to
the qualification of one of the contracting
parties
2. Identity or qualification must have been
the principal consideration for the
celebration of the contract
 vitiates consent
ART. 1332: UNDERSTANDABLENESS OF
THE CONTRACT
Presumption: parties have understood the terms of
the contract they voluntarily signed especially when
there is proof that they are educated
Person enforcing the contract must show that the
terms thereof have been fully explained to the other
party if:
 One of the parties is unable to read
 In the (foreign at least for him) language he
cannot understand
 Mistake or fraud is alleged
o All must first be proved by the person
invoking these by evidence
ART. 1333: CONSCIOUS IGNORANCE
Where the parties are conscious that the existence of
particular facts is doubtful and make their
agreement to this assumption, the non-existent of
such facts does not affect the validity of the
agreement, the risk of their existence being taken
by the parties.
CASE – Wood v Boyton: seller sold a stone to the
purchaser a stone for one dollar after they discussed
their ignorance to its nature. The stone turns out to
be a diamond.
 No mistake – there was conscious uncertainty
when the purchase was made
ART. 1334: MISTAKE OF LAW
Mistake of Law - when a party enters into a contract,
without the knowledge of the law in the area or
country
 Ignorance of law is not an excuse.
Generally, a unilateral mistake of law is not a
ground to annul a contract.
EXCEPTION REQUISITES:
1. The mistake as to the legal effect of the
agreement must be mutual.
2. It frustrates the real purpose of the parties.
ART. 1335: VIOLENCE AND INTIMIDATION
VIOLENCE – serious and irresistible force
 Total absence of will – annullable
INTIMIDATION – reasonable and well-grounded
fear of an imminent and grave evil upon his property
and persons, and their properties.
 Degree of intimidation – age, sex, and
condition are to be considered
 Specific acts or instances of such nature and
magnitude
REQUISITES OF INTIMIDATION
1. Must be the determining cause of the contract,
or must have caused the consent to be given
2. Unjust or unlawful
3. Real and serious, there being an evident
disproportion between the evil and the
resistance, leading to the contract as the lesser
evil
4. Produces reasonable and well-grounded fear
from the fact that the person threatening has the
necessary means or ability to inflict the
threatened injury
THREAT – tangible and direct
 Threat to enforce one’s claim through
competent authority, if the claim is just or
legal, does not vitiate consent.
o Does not constitute duress
 Threatening litigation while the defendant is ill,
or to continue litigation when the
circumstances are oppressive - duress.
ART. 1336: VIOLENCE OR INTIMIDATION
EMPLOYED BY A 3RD PERSON IN THE
CONTRACT
Ex. A is coerced to enter into a contract with X
because G threatens to kill all the children of A if
he does not do so.
 Annullable whether or not X knew of the
intimidation
 Common reason: 3rd person will benefit on the
contract if made
ART. 1337: UNDUE INFLUENCE
UNDUE INFLUENCE – a person takes improper
advantage of his power over the will of another,
depriving the latter of a reasonable freedom of
choice
 Unrighteous
 Illegal
 Designed to perpetrate a wrong
 Grantor – overreached and deceived by false
representation, stratagem or by coercion,
physical or moral
ART. 1338: FRAUD
FRAUD – 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
CASE – Rivero v CA: a nephew of an old illiterate
sickly woman took advantage of the desperate
condition of the woman by making her believe and
sign to a Kasulatan which she knew as a mortgage
contract, but where it appeared that the nephew was
the buyer.
ART. 1339: DUTY TO DISCLOSE
CONFIDENTIALITY AMONG THE PARTIES
Special and peculiar circumstance of the contract –
give rise to the duty of the dominant party to
disclose certain facts material to the transaction
 Non-disclosure – fraud
ART. 1340: EXAGGERATIONS IN TRADE
TRADE – involves exaggeration to consummate a
particular transaction
 Exaggeration may be fraudulent amounting to
active misrepresentation
 If the other party, despite having the means, did
not investigate the truthfulness of such
exaggeration – no fraud
ART. 1341: OPINION
OPINION – not regarded as representation of facts,
thus, not considered fraud
Opinion made by an expert – he knows for a fact that
his opinion will turn out to be false yet still
induces the other party, fraud
ART. 1342: MISREPRESENTATION BY 3RD
PERSON
CASE – RB Caloocan v CA: a contract may be
annulled on the ground of vitiated consent if deceit
by a third person, even without connivance or
complicity with one of the contracting parties,
resulted in mutual error on the part of the parties to
the contract.
ART. 1343: MISREPRESENTATION IN GOOD
FAITH
MISREPRESENTATION – may innocently be
made which constitutes merely an error
 Every fraud is misrepresentation
 Every misrepresentation is not fraudulent
 Good faith – honesty, sincerity
ART. 1344: NATURE OF FRAUD
FRAUDULENT – serious; intended to injure and
that damage or injury in fact resulted
Pari delicto (in equal fault) – should not be mutually
guilty of fraud
NATURE THAT MAKES A CONTRACT
ANNULLABLE
Dolo causante – very cause why the other party
entered into the contract
Dolo incidente – incidental and collateral fraud;
only entitles the aggrieved party to merely damages
 Not serious in character
 Without which, the other party would have
entered into the contract anyway
 Fraud in the performance of the contract
Both dolos:
 grounds for the issuance of a writ of
preliminary attachment – puts the property
within the jurisdiction of the court while a case
is pending to assure the availability of properties
to the winning party.
 Quantum of evidence – not mandated in the
NCC
o Clear and convincing evidence is
sufficient
ART. 1345 & ART. 1346: SIMULATION OF
CONTRACT – ABSOLUTE AND RELATIVE
SIMULATION OF CONTRACT – deliberate act
of making a fictitious agreement by the parties for
the purposes of deception, when in fact the juridical
act that appears on the contract does not really exist
or is different from what is actually agreed upon.
 Burden of proving – on the person who impugns
its regularity and validity
2 KINDS
1. ABSOLUTE – colorable contract but has no
substance; parties have no intention to be
bound by it – void
Ex. A person, in order to place his property beyond
the reach of his creditors, simulates a transfer of it to
another but does not really intend to divest himself
of his title and control of the property.
2. RELATIVE – false cause to conceal the
real agreement; has the essential elements
of a contract – valid if
a. Does not prejudice a 3rd person
b. Not intended for any purpose
contrary to law, morals, good
customs, public order or public
policy
Ex. A donor is donating a property to a donee.
Instead of executing a deed of donation, the donor
instead executed a deed of sale to conceal the
donation intended.