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Prepared by: Raymond Andes Sources: The New Civil Code of the Philippines; commentaries by Paras, Suarez, and Tolentino; reviewer published by Soriano; reviewers prepared by UP Law Bar-Ops Commission and Karichi Santos of UP Law B2012; and some personal inferences. Definition according to the Civil Code of the Philippines: 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. We can infer from the very definition of Contract that obligations would always naturally exist upon the perfection of a contract. In short, when there is a contract, there will always be an obligation but when there is obligation, there isn’t always a contract. Elements of a Contract 1. Essential Elements – without these elements, there is no contract. A defect in any of these elements causes a defect in the contract. a. Consent of the parties – most important of all elements. This is the meeting of minds between parties on the object and cause of the contract b. Object – the subject matter of the contract c. Cause – the essential and impelling reason why a party assumes an obligation. 2. Accidental Elements – those that which exist only upon stipulations in the contract (such as terms of payment, place of payment, conditions, etc.) 3. Natural Elements – those that even without stipulations, they exist (such as warranty against hidden defects and warranty against eviction). However, parties can stipulate waiver of such elements. Classifications of Contracts 1. According to perfection or formation a. Consensual – those perfected upon mere consent (such as sales) b. Real – those perfected upon delivery of the object (such as depositum, pledge, and commodatum) c. Formal or Solemn – those that can only be valid through compliance with the formalities of law (such as donation of a real property) 2. According to cause a. Onerous – where there is exchange of valuable considerations b. Gratuitous – where one party receives no equivalent consideration c. Remuneratory – the cause is the service remunerated 3. According to dependence upon another contract a. Principal – one that stand by itself b. Accessory – one whose existence depends another contract known as the principal contract (such as mortgage and pledge) c. Preparatory – one which serves as a means in which other contracts may be entered (such as agency and partnership) 4. According to parties obligated a. Unilateral – those where only one of the parties are required to accomplish the determinative conduct b. Bilateral or synalagmatic – those where both parties are required to accomplish their own determinative conducts 5. According to time or fulfillment a. Executed – one which has already been performed b. Executory – one that has not yet been performed
Consent has two parts: Offer and Acceptance. except where the rights and obligations are not transmissible. …one of the parties dies. offer does not exist yet. Obligatory force of contract and compliance in good faith – all contracts have the force of law between the contracting parties and should be complied with in good faith. public order and morals. Consummation or Death or Termination – the point at which the terms of the contract have been fulfilled resulting in its accomplishment Basic Principles of a Contract 1. This is one of the liberties guaranteed by the laws of the land to the people.6. The validity or compliance of the contract cannot be left to the will of one of them. the contract is usually perfected. Preparation or Conception – involves preliminary negotiations. 3. discussion of terms and conditions wherein agreement has not yet occurred. The offer becomes ineffective. their assigns and heirs. According to the number of persons physically entering into the contract a. 2. Advertisements are mere invitations to make an offer. 2. is civilly . ESSENTIAL REQUISITES OF CONTRACTS (expounded) CONSENT Consent is manifested by the meeting of the offer and the acceptance upon the object and the cause which are to constitute the contract. 3. public policy. Mutuality of contracts – the parties are both bound to one another. therefore contract will not exist. 4. if all details needed are conveyed to the public. 5. Upon communication of acceptance of one of the parties towards the other. At this point. good customs. this is subject to limitations as follows: law. it is the meeting of minds of both parties. Relativity of contracts – contracts take effect only within the contracting parties. Liberty of contract or freedom to stipulate – the parties have the liberty to contract and stipulate. advertisement becomes an offer. Consensuality of contracts – contracts are usually perfected by mere consent of the parties except if the contracts are real and formal/solemn. Perfection or Birth – the point at which there is finally a meeting of minds between parties as to the object and the valid cause. Ordinary – where the two parties are represented by two different persons b. However. What happens if… …the offer is vague? Will there still be a contract? …a seller advertised his products to the public? Is there already an offer? Answer There wouldn’t be meeting of minds. In plain language. However. Thus. Auto-contract – where the two parties are represented by only one person (such as in agency where the agent lends money to his principal who he represents as the borrower) Stages of a Contract 1.
Yes. However. Gaganda ka lalo…” May 31. 10:46 pm Karen receives Kent’s text message. 11:37 pm Due to problems in signal. insane or incapacitated before acceptance is conveyed? What happens to the offer? …an offerer gives the offeree a certain period of time to accept. She replies: “Sige. Di basta-basta yan. Contract is perfected upon the point at which acceptance is communicated to the offerer. dalhin ko na. go! Pero. He remembers something. can the offerer withdraw the offer? there is no contract. She makes a reply: “Pano ba ako nakakasigurong totoo yang sinasabi mo eh lalake ka?” May 31. Karen receives text message at this late. He shakes his head then sends back a message: “Hay naku gurl. bilhin mo naman make-up ko from Avon. The former is entitled to compel the latter not to withdraw the offer until the prescription of the period of time. 11:50 pm Kent thought for awhile. 15. what kind of contract as to perfection is an option contract?) Major Rule on Consent There is no consent until there has been agreement between two parties. maganda na mura pa. if the offeree failed to give the option money. Because. Example May 31. No. the latter gives the former an option money. can the offerer withdraw the offer? …after the offerer has given the offeree a certain period of time to accept. 10:48 pm Kent receives text message. 10:45 pm Kent texts Karen: “Hoy Bakla.000 pesos lang. in effect. then makes a reply: “Alala mo ba kahapon kung ano itsura ko?” May 31.interdicted. as long as he communicates such withdrawal before the acceptance has been communicated. He takes his calculator and tried to compute his profit. mahal yan. the offeror has the liberty to withdraw the offer. the offeree has bought the time period given by the offerer. pwede 10.000 pesos na lang?” May 31. Bukas. It is as if there is no such option contract. 11:51 pm .” May 31. (Q: Using inference.
. kamuka ko si Diether at pagtingin mo sa kabila. kamuka ko na rin si Piolo!” May 31. 11:57 pm Karen: “May magic ang make-up mo???!!!” May 31. 11:55 pm Karen: “Huh? Di mo naman kamukha si Piolo Pascual at di mo rin kamukha si Diether Ocampo!” May 31. Reason: To protect incapacitated persons from damages that may be caused by the other party. Question: At what time was there a meeting of minds? At what time was there perfection of the contract? Answer June 1.Karen: “Absent ka kahapon so pano ko malalaman?” May 31. 11:53 pm Kent: “Akala mo lang yun! Present ako no… ako yung naka-blue with stripes of white kahapon…” May 31. 12:01 am. Willing ako!” June 1. 11:59 pm Karen: “Sige. go! Bilhin ko na. Meeting of minds occurs at the moment the offeror receives the offeree’s acceptance. 11:58 pm Kent: “Ano pa ba sa tingin mo?” May 31. 12:03 am Karen receives Kent’s last text message and finally rests her head on the bed and starts sleeping.” June 1. Contracts entered into by incapacitated persons are VOIDABLE if only one of the contracting persons is incapacitated and UNENFORCEABLE if both parties are incapacitated. 11:56 pm Kent: “That’s the point! Linagay ko make-up from avon kaya on my left side. 12:01 am Kent receives Karen’s last text message and replies: “Okay. Capacity Parties entering into a contract must have the legal capacity to do so.
depriving the latter of a reasonable freedom of choice (Art. Violence – irresistible force used to extort consent (JBL Reyes) 4. In order that mistake may invalidate consent. or which is different from the one that actually arose. A) the expert was hired by the seller. (Reyes) Kinds of Simulated Contracts 1. Simulation of Contracts: Declaration of a non-existent will producing the appearance of a transaction that does not exist. the other is induced to enter into a contract which.Who are the incapacitated persons? 1. 2. . it should refer to the substance of the thing which is the object of the contract. 2. This contract is void. 3. Fraud – happens when through insidious words or machinations of one of the contracting parties. without them. Usual exaggerations in trade made by the seller and the other party had an opportunity to know the facts. Seller expresses an opinion and the buyer believes such opinion. 4. B) the expert was hired by the buyer. or (2) when the minor misrepresents his age (the reason for this is to protect the other party from harm that may be caused by such misrepresentation. However. Absolutely Simulated Contract – contract which provides for a transaction that does not exist. he would not have agreed to (Art. 2. Minors – those aged below 18 (RA 6805). 1337). if the other party knows such misrepresentation. descendants or ascendants. 3. unless guided by another person. or to those conditions which have principally moved one or both parties to enter into the contract. Query: Is there Fraud in the following circumstances? 1. contract remains voidable). 5. Undue Influence – happens when a person takes improper advantage of his power over the will of another. Expert expresses an opinion. 3. Mistake – inadvertent and inexcusable disregard of a circumstance material to the contract (JBL Reyes). or upon the person or property of his spouse. 1338). to give his consent (Art. Vices of Consent 1. Exceptions: (1) if the contract is entered into for the purpose of acquiring necessaries. 1335). unless they contract during lucid interval. Offeror failed to disclose certain important facts to the offeree and the former has the duty to reveal them. Insane or demented persons. Deaf-mutes who do not know how to read and write. Intimidation – happens 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.
it can exist subsequently or in the future. 4. However. dependent on w/n the 3rd person is in good faith. morals. A future thing may be the object of a contract. it will be binding. public order or public policy. Requisites: 1. morals. Absolute No real transaction intended Fictitious contract Void Relative Real transaction is hidden Disguised contract Bound as to hidden agreement. if a 3rd person is benefited by the “appearing” contract.” the species is not determined. Actual or possible 3. In order that a thing. the sale is void. Examples: property that pertain to public dominion such as roads and plazas. Lawful: Not contrary to law. the sale is valid because this is permitted by law (Art.2. however. and not by those applicable to the “appearing” contract. or at least. Aleatory Contract: where one of the parties assumes the risk that the thing will never come into existence. The validity and effects of this contract will be governed by the rules applicable to the “intended” contract. good customs. Relatively Simulated Contract – contract which provides for a transaction that differs from the one that actually arose. If the object is a specific property you are expecting to inherit from an ascendant. CAUSE Cause is the impelling reason for which a party assumes an obligation . it should be in existence at the moment of the celebration of the contract. the contract would be void. right or service may be the object of a contract. 2. Transmissible: within the commerce of man. and which are not transmissible. If the object is merely “something” or “an animal. e. 1630). common things like the air and the sea. Things that are outside the commerce of man are those things that are not susceptible of appropriation or of private ownership. right or service which is the subject matter of the obligation arising from the contract. insurance. public policy. This is.g. such contract may be interpreted as a: • • Conditional Contract: where its efficacy should depend upon the future existence of the thing. True agreement is concealed for some reasons. But if the object is merely the future hereditary rights without specification of the properties. customs or public order OBJECT Object is the thing. At least determinate as to its kind. Q: Can future inheritance be the object of a contract? It depends. so long as it does not prejudice a 3rd person and is not contrary to law.
Cause and Object in Other Types of Contract Remuneratory Definition It is a contract where a party gives something to another because of some service or benefit given or rendered by the latter to the former. public policy and public order Cause is stated but is untrue Effect Contract is null and void Null and void Void if it should NOT be proved that it was founded upon another cause which was true and lawful. Circumstance Lack of Cause Illegality of Cause Falsity of Cause Defined Absence or total lack of cause Contrary to law. Party vendOR vendEE Cause Cash (wants to profit) Land (wants to acquire land) Land Land Object According to Tolentino. without which the negotiations or bargaining between the parties would never even have begun. morals. Example: Jerelyn bought a piece of land from Daila because she wants that piece of land used for constructing a vacation house (the land is located in Caramoan). service or act which forms the basis of the entire contract. the starting point of the agreement.Requisites: (1) Existing. individual and personal reason which induces a party to enter into a contract. the object in onerous contracts is the thing. . Lesion or Inadequacy Cause is not proportionate to object. good customs. where such service or benefit was not due as a legal obligation. (3) True*. Query: What is the cause and what is the object in a sale of land? Answer: It depends on which perspective. • Shall not invalidate the contract except when there is fraud. (2) Licit/Lawful. (Tolentino)* The service or benefit which is remunerated Thing given in exchange for the service or benefit Gratuitous Agreements to give something or to lend something. The cause is the piece of land she wants to own while the motive is Jerelyn’s desire to have a place for relaxation. Cause Object Mere liberality of the benefactor or giver Thing given (for donation) or thing lent (commodatum) What is Motive? It is the psychological.
Voidable Contracts – valid until annulled.000 ii. a.Representation to the credit of a 3rd person DEFECTIVE CONTRACTS The following are defective contracts: 1. Must be in writing to be enforceable: ii. provided all the essential requisites for their validity are present. These contracts are voidable because of a defect in the consent.Leasing for a period more than one year. This is based on the EQUITABLE REASONS. a.of Cause mistake. default.Special promise to answer for the debt.Authority of an agent in sale of land 2. chattels. When the law requires that contract be in some form to be enforceable. Must be in writing: i. They are valid because the party injured can ratify the contract but the law gives such party the right to annul the same. Rescissible Contracts – valid until rescinded.Contribution of immovable property by a partner in a partnership b. (Statute of Frauds) Failure to abide by this provision does not render the contract void. other than mutual promise to marry v. it merely renders the contract unenforceable. Void Contracts – void from the beginning.Agreement made in consideration of marriage. 3. 2.Agreement that by its terms is not to be performed within a year from the making thereof iii. or things in action. or undue influence May rescind the contract under some instances(see rescissible contracts) FORMS OF CONTRACTS GENERAL RULE: Contracts shall be obligatory in whatever form they may have been entered into. . EXCEPTIONS 1. Such contract is a formal contract. Must be in public instrument to be valid: i. vi. They are valid because there is no defect in any of the essential requisites BUT the law allows a party to rescind (or cancel) the contract because of the damage received by such party.donation of real property ii. at a price not less than P500. or miscarriage of another iv.Donation of personal property exceeding P5.Sale of goods. 4. When the law requires that a contract be in some form to be valid. Unenforceable Contracts – valid but cannot be enforced unless ratified. vii.Sale of real property or of an interest therein viii.
Creditor has no other remedy but to rescind the debtor’s contract to the 3rd person (last resort) 4. In effect. · This type of contract is usually entered into by a person other than the absentee who has the right of representation but entered into such contract that caused damage of more than ¼ of the value of the things. Debtor has made subsequent contract. However. wars. Act being impugned is fraudulent 5. natural calamities. 3. object and cause). harm or damage is caused or being caused against a party (be it one of the contracting parties or any 3rd party). . suffer lesion by more than ¼ of the value of things · Absentee is a person who was lost for an indefinite period of time due to some freak accident. The sale of beach resort can be rescinded by Jerelyn. or any other reason that have caused him to be absent for a period of time. In fraud of creditors who cannot collect claims due them (Accion Pauliana) · Requisites of Accion Pauliana 1. it becomes unenforceable. no power to dispose without prior approval of court. For equitable reasons. She was absent for several years. because if sale. Entered into by guardians whenever the wards suffer lesion by more than ¼ of value of things · Guardian: authorized only to “manage” ward’s property. the validity of this contract is set aside for justifiable reasons of equity. mortgage and other encumbrance AND not approved by court. giving advantage to a 3rd person 3. 3rd person who received the property is an accomplice in the fraud Contracts entered by GUARDIANS Contracts in representation of ABSENTEES By absentee Contracts entered into to DEFRAUD existing creditors By creditor(s) Who can rescind? In general. But can be done also by guardian ad tem (new guardian) of ward during incapacity of ward in an action against the original guardian. Plaintiff asking for rescission (subsidiary action) has a credit prior to the alienation 2.RESCISSIBLE CONTRACTS Rescissible contracts are entirely valid as to essential elements (consent. Her wife (assume that gay marriage is already legal) later gained the right of representation and then sold Jerelyn’s beach resort for 75% below its appraised value. Kinds of Rescissible Contracts 1. by the injured party. Agreed upon in representation of absentee. the law gives the injured party the right to rescind (cancel) the contract. Only includes those which are “ordinary course” of management of estate of the ward. Example: Jerelyn was abducted by aliens. 2.
Want of capacity 2.Within 4 years .When? W/in 4 years from (re)gaining capacity How to cure defect? Ratification by injured party w/in 4 years from gaining capacity W/in 4 years from knowledge of domicile* of absentee Ratification by absentee w/in 4 years from knowledge of domicile* of absentee or knowledge of fraudulent contract W/in 4 years from knowledge of fraudulent contract Ratification by defrauded creditor w/in 4 years from knowledge of fraudulent contract VOIDABLE CONTRACTS Voidable contracts are existent. 328). They are susceptible of convalidation by ratification or by prescription NULLITY (Voidable) Declares inefficiency which contract already carries in itself (intrinsic defect) RESCISSION (Rescissible) Merely produces inefficiency. Fraud. which did not exist essentially in the contract (external defect i. valid. Their defect consists in the vitiation of consent of one of the contracting parties 2. Mistake or Undue Characteristics of Voidable/Annullable Contracts: 1. but before the annulment. Intimidation. Hence. pecuniary damages or prejudice to one of the contracting parties or 3rd persons) Needs no ratification to be effective Compatible with the perfect validity of the contract Rescission is a remedy based on equity Demanded even by third parties affected by it Requires act of ratification to be cured Based on a vice of the contract which invalidates it Annulment is a sanction based on law Demanded only by the parties to the contract Prescription of Action for Annulment – after prescription. Vitiated consent (Violence. Kinds of Voidable/Annullable Contracts (Although no damage to contracting parties): 1. although they can be annulled because of want of capacity or vitiated consent of one of the parties. and binding. contract can no longer be annulled Art 1391 . 12 Phil. They are binding until they are annulled by a competent court 3. it is valid until it is set aside and its validity may be assailed only in an action for that purpose (Llacer v Munoz. they are effective and obligatory between the parties.e.
3. or miscarriage of another iii. Damages to be paid by the party who caused defect of the contract. Mistake or fraud: from the time of discovery of the same 3. 2. chattels.Leasing for a period more than one year. Ratification by one party (or its guardian) makes the contract voidable. violence or undue influence: from the time consensual defect ceases 2. which are agreements unenforceable unless in written memorandum and subscribed by the party charged: i. or things in action. vi. VOID CONTRACTS A void contract is one which has no force and effect from the very beginning. but NOT to third persons Effects of Annulment: 1. Both parties are incapable of giving consent to contract • • • Ratification can be done by either parties or their guardians. Intimidation. Entered into in the name of another person by one who has no authority or no legal representation OR acted beyond his powers 2. v.Sale of goods. It is distinguished from the rescissible and the annullable contracts in that the latter two contracts produce legal effects unless they are set aside by a competent court. The maxim is “no contract at all. other than mutual promise to marry iv. UNENFORCEABLE CONTRACTS Unenforceable contract is one which cannot be enforced unless it is first ratified in the manner provided by law. as if it had never been entered into.Period shall begin: 1.Sale of real property or of an interest therein vii. Ratification made by both parties (or their guardians) makes the contract perfectly valid. Do not comply with Statute of Frauds. and which cannot be validated either by time or by ratification. even partly. while the unenforceable contract does not produce any effect unless it is ratified.Special promise to answer for the debt. at a price not less than P500. Kinds of Unenforceable Contracts 1.” . along with fruits and price paid with interest.Agreement that by its terms is not to be performed within a year from the making thereof ii. the contract’s status as unenforceable ceases as execution is considered by law as a form of ratification. default.Agreement made in consideration of marriage.Representation to the credit of a 3rd person • If the contract has been executed. Mutual restitution of the things delivered. Incapacity: from the time guardianship ceases * Applies to the parties of to the contract.
object or purpose is against law. cannot be enforced unless properly ratified Examples of Void Contracts • One whose cause. Void from the beginning 2. either in fact or in law or is declared void by statute Not susceptible of ratification Action to declare nullity of void contracts never prescribes VOID RESCISSIBLE Defect is in their effects. public policy. Produces no effect whatsoever nullity exist ipso jure. BUT consent is vitiated May be rendered perfectly valid by ratification May be rendered perfectly valid by ratification UNENFORCEABLE Both are ineffective at its birth Can never be ratified and become enforceable There is no contract at all Can be ratified and thereafter enforced There is a contract which. judgment of nullity is merely declaratory 3.Characteristics of Void/Inexistent Contracts 1. remains valid and produces all its effects Action to rescind prescribes in 4 years VOIDABLE Essential requisites for validity is present. . neither can the right to set up the defense of illegality be waived Art 1409 Action to Declare Nullity – necessary because nobody can take the law into his own hands DISTINCTIONS VOID Defect is inherent in the contract itself Matter of law and public interest No legal effects even if no action is taken to set it aside Action to declare nullity of void contracts never prescribes VOID One of those essential requisites is wanting. however. either to one of the parties or to a 3rd party Based on equity and more a matter of private interest No action. Cannot be confirmed or validated (by prescription OR ratification). morals. public order or good customs.
One whose object is impossible or cannot be done. Absolutely-simulated contracts .• • • One whose cause is totally absent.
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