Contracts  transfer of large cattle

 stipulation to pay interest in loans

 partnership to which immovable are
Definition of Contract contributed
 stipulation limiting carrier’s liability to less than
Art. 1305, Civil Code: extra-ordinary diligence

A contract is a meeting of minds between two (2)

persons whereby one binds himself, with respect
Essential Elements of a Contract
to the other, to give something or to render some
service. 1. Consent

2. Object

Characteristics of a Contract 3. Cause

1. Relativity (Art. 1311, Civil Code)

2. Obligatory and Consensual (Art. 1305) Elements of Consent

1. Legal capacity of contracting parties

3. Mutuality (Art. 1308)
2. Manifestation of conformity of contracting parties
4. Autonomy (Art. 1306)
3. Parties’ conformity to the terms and conditions of the
contract must be intelligent, spontaneous and free from
all vices
Stipulation Pour Atrui
4. The conformity must be real
General Rule: relativity of contracts

Exception: benefits deliberately conferred by

parties to a contract upon third persons Kinds of Simulated Contracts

Requisites: 1. Absolute – no intention to be bound at all, fictitious

only – void from the beginning
1. Stipulation must be part, not whole of the
2. Relative – there is intention to be bound but the
contract
intention is concealed; the contract is binding if:
2. Contracting parties must have clearly and a. No prejudice to 3rd persons
deliberately conferred a favor upon 3rd persons
b. Not contrary to law, morals, etc.
3. Third person must have communicated his
acceptance

4. Neither of the contracting parties represent the Contract of Adhesion

3rd person One party has already prepared form of a contract
containing the stipulations he desires and he simply
asks the other party to agree to them if he wants to
Classifications of Contracts (as to perfection) enter into the contract.

1. Consensual – perfected by mere meeting of

minds of parties Elements of a Valid Offer

2. Real contracts – require delivery for perfection 1. Definite

3. Solemn contracts – contracts which must 2. Intentional

appear in writing donations of real estate or
3. Complete
movable worth PhP 5,000
When Offer Becomes Ineffective
1. Death, civil interdiction, insanity or insolvency of
either party before acceptance is conveyed
2. Express or implied revocation of the offer by the
offeree
3. Qualified or conditional acceptance of the offer,
which becomes counter-offer
a. Offer is made to a person present – acceptance
must be made immediately
b. Offer is made to a person absent – acceptance
must be made within such time that, under normal
circumstances, an answer can be received from him
Acceptance may be revoked before it comes to the
knowledge of the offeror

4. Subject matter becomes illegal or impossible before

acceptance is communicated Requisites of an Object

1. Determinate as to kind

Rule on Advertisements as Offers 2. Existing or the potentiality to exist subsequent to the

contract
1. Business advertisements – not a definite offer, but
mere invitation to make an offer, unless it appears 3. Licit
otherwise
4. Within the commerce of man
2. Advertisement for Bidders – only invitation to
make proposals and advertiser is not bound to accept 5. Transmissible
the highest or lowest bidder, unless appears otherwise

Requisites of a Cause
Rule on Complex Offers
1. Exists
1. Offers are interrelated – contract is perfected if all
2. True
the offers are accepted
3. Licit
2. Offers are not interrelated – single acceptance of
each offer results in a perfected contract unless the
offeror has made it clear that one is dependent upon
the other and acceptance of both is necessary Kinds of Causes

1. Cause of onerous contracts – the prestation of

Elements of a Valid Acceptance
1. Absolute, not a qualified acceptance
2. No specific form but when the offeror specifies a
specific form, such must be complied with
The acceptance made by the offeree binds the offeror
only from the time the offeror came to know of the
acceptance.
promise of a thing or service by the other
2. Cause of remuneratory contracts – the service or
benefit remunerated
3. Cause of gratuitous contracts – the mere liberality
of the donor or benefactor
4. Accessory – identical with cause of principal
contract

The law presumes that the contract was perfected at

the place where the offer was made, the place of origin Cause vs. Motive
of the conception of the contract

Period of Acceptance

1. Stated fixed period in the offer

2. No stated fixed period

Form of Contracts Defective Contracts

General Rule: contracts are obligatory regardless of 1. Void and Inexistent

form
2. Voidable
Exception: Contracts must be in a certain form when
the law requires that a contract be in some form to be 3. Rescissible
valid, enforceable or for the convenience of the parties.
4. Unenforceable
The parties may compel each other to reduce the
verbal agreement into writing.
Defective Contracts: Rescissible

Rescissible: those which have caused a particular

Acts that must appear in a public document:
1. Donation of real property
2. Partnership where immovable property or real rights
are contributed to the common fund
economic damage either to one of the parties or to a
third person and which may be set aside even if valid.
It may be set aside in whole or in part, to the extent of
the damage caused.

3. Acts and contracts which have for their object the

creation, transmission, modification or extinguishment Types of Rescissible Contracts
of real rights over immovable property
1. Entered into by persons exercising fiduciary
4. The cession, repudiation or renunciation of capacity:
hereditary rights or of those of the conjugal partnership
a. Entered into by guardian whenever ward suffers
of gains.
damage more than ¼ of value of property
5. The power of administer property or any other power
b. Agreed upon in representation of absentees, if
which has for its object an act appearing or which
absentee suffers lesion by more than ¼ of value of
should appear in a public document or should prejudice
property
a third person
c. Contracts where rescission is based on fraud
6. The cession of actions or rights proceeding from an
committed on creditor
act appearing in a public document.
d. Objects of litigation

Reformation of Contracts
Reformation of contracts is a remedy to conform to the
real intention of the parties due to mistake, fraud,
inequitable, conduct, accident.
Prescriptive period for reformation: 10 year
e. Payment by an insolvent
2. Payments made in state of insolvency:
a. Plaintiff has no other means to maintain reparation
b. Plaintiff must be able to return whatever he may be
obliged to return due to rescission

c. The things must not have been passed to third

persons in good faith
Requisites in reformation of instruments
d. Made within 4 years
1. Meeting of minds to the contract

2. True intention is not expressed in the instrument

3. By reason of mistake, accident, relative simulation,

fraud or inequitable conduct

4. Clear and convincing proof of the foregoing

Characteristics of a voidable contract
1. Effective until set aside
2. May be assailed or attacked only in an action for that
purpose
3. Can be confirmed
4. Can be assailed only by the party whose consent
was defective or his heirs of assigns
When is there a voidable contract?
1. When a party is incapacitated to give consent
2. When consent is vitiated
Parties incapacitated to give consent
1. Deaf-mutes who do not know how to read and write
2. Insane or demented persons
3. Minors, except:
- contracts for necessaires
- contracts by guardians and legal representatives, with
court approval
- When the minor actively misrepresented his/her age
- Contracts of deposit with the bank provided the minor
is over 7 years
- Upon reaching the age of majority, the minor ratifies
the contract
The vices of consent:
1. Mistake: substantial mistake, not just accidental
2. Intimidation: an internal moral force operating in the
will and inducing performance of an act
3. Violence: an external, serious or irresistible physical
force exerted upon a person to prevent him from doing
something or compel him to do an act
4. Undue Influence: any means employed on a party
which could not be resisted and has the effect of
controlling his actions
5. Fraud: use of insidious words or machinations in
inducing another party to enter into the contract
Kinds of Mistake
1. Mistake of fact: when one or both parties believe
that a fact exists when in fact it does not, or that such
fact does not exist when in fact it does.
2. Mistake of law: when one or both parties arrive at
erroneous conclusion or interpretation of a question of
law or legal effects of a certain act or transaction.
Mistake as a vice of consent refers to mistake of facts
and not of law.
When mistake of law makes a contract voidable?
1. Mistake is with respect to the legal effect of the
agreement
2. It is mutual
3. The real purpose of the parties must have been
frustrated
Requirements for intimidation:
1. One of the parties is compelled to give his consent
by a reasonable and well-grounder fear of an evil
2. The evil must be imminent and grave
3. The evil is unjust
4. The evil must be the determining cause for the party
upon whom it is employed in entering into the contract
Requirements for violence:
1. It is serious or irresistible
2. It is the determining cause for the party upon whom
it is employed in entering into the contract
Kinds of fraud in the perfection of contract:
1. Causal fraud (dolo causante)
2. Incidental fraud (dolo incidente
Causal fraud leads to a voidable contract.
Defective Contracts: Unenforceable Contracts prohibited by laws:

These contracts are unenforceable unless ratified:
1. Those entered into without or in excess of authority
2. Those that do not comply with the Statute of
Frauds, i.e., are not in writing nor subscribed by the
party charged or his agent
3. Those where both parties are incapable of giving
consent
1. Pactum commissorium: the creditor appropriates
to himself the things given by way of pledge or
mortgage to fulfill the debt
2. Pactum de non alienando: an agreement
prohibiting the owner from alienating the mortgaged
immovable
3. Pactum leonina: a stipulation in a partnership
agreement which excludes one or more partners from
any share in the profits or losses

Statute of Frauds
Void vs. Voidable Contracts
Provides for unenforceability by action of the following
agreements unless the same or some note or
memorandum thereof be in writing and subscribed by
the party charged and his agent.

Contracts covered by Statute of Frauds:

a. Agreement which by its terms is not to be performed

within a year from the making thereof.

b. Agreement for the sale of goods, chattels, or things

in action, at a price not less than Php500.00.
Void vs. Recissible Contracts
c. An agreement for the leasing for a longer period than
one year or for the sale of real property or of an interest
therein.

d. Special promise to answer for the debt, default or

miscarriage of another.

Evidence of the foregoing cannot be received without

the writing or a secondary evidence of contents (Art.
1403).

Defective Contracts: Void and Inexistent

1. Those whose cause, object or purpose is contrary to

law, morals, good customs, public order or public policy

2. Those which are absolutely simulated or fictitious

3. Those whose cause or object did not exist at the time

of the transaction

4. Those whose object is outside the commerce of man

5. Those which contemplate an impossible service

6. Those where the intention of parties relative to the

principal object of the contract cannot be ascertained

7. Those expressly prohibited or declared void by law.