Essential Requisites of Contracts

Coverage of Discussion
Consent
Object
Consideration
 Consent, Concept
 It is the manifestation of the meeting of the offer and the acceptance upon the
thing and the cause which are to constitute the contract.
 Rules on offer
◦ The offer must be certain – “definite, complete and intentional”
 Nature of Advertisements
1. Business advertisements of things for sale are not definite offers, but mere invitations
to make an offer unless it appears otherwise.
2. Advertisements for bidders are merely invitations to make proposals and the advertiser
is not bound to accept the highest or lowest bidder, unless the contrary appears.
◦ An offer becomes ineffective upon the death, civil interdiction,
insanity or insolvency of either party before acceptance is
conveyed.
◦ 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accept, the offer may be withdrawn at any time before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.
Option, Concept
Is a contract whereby the offeror gives the
offeree a certain period within to buy or not
to buy a certain object for a fixed price.
◦ Right of the offeror to withdraw the offer
A. If there is no consideration for the option, the offerer
may withdraw the offer at anytime within the option
provided there has not yet been any acceptance.
B. If there is a consideration, the offerer may not
withdraw the offer before the lapse of the period.
Otherwise, he will be liable for damages to the
offeree for breach of contract.
Note: In both cases, the option is extinguished
upon the lapse of the period, unless in the
meantime, the offeree has accepted the offer.
S promised to sell his car to B for 100,000
giving B 30 days to decide. B accepts the
promise. S may withdraw his promise even
before the lapse of the 30-day period by
informing B of the withdrawal. However, if B
had given to S option money of say, 1,000, S
cannot withdraw the offer before the lapse of
the option period because the option given to
B was founded upon a consideration.
Rules on acceptance
The acceptance must be absolute.
A. If the acceptance is qualified, it constitute a counter-
offer; and has the effect of rejecting the offer.
 S offers to sell his car for 100,000 to B. B accepts the offer
but is willing to pay the price of 95,000 only. The
acceptance made by B is a qualified acceptance which
constitutes a counter-offer. Accordingly, no contract if
perfected. However, if S accepts the counter-offer, then
there will be a perfected contract at the price of 95,000.
B. If the offer fixes the time, place and manner of
acceptance, all must be complied with. Otherwise,
there will no meeting of minds.
Acceptance made by letter or telegram does
not bind the offerer except from the time it
came to his knowledge. The contract in
such case is presumed t have been entered
into the place where the offer was made.
Acceptance may be express or implied.
An offer made through an agent is accepted
from the time it is communicated to him.
Acceptance may be express or implied
An offer made through agent is accepted
from the time it is communicated to him.
Rules on consent
The parties must have the capacity to enter
into a contract. The following cannot give
consent to a contract:
A. Unemancipated minors
Emancipated takes place by the attainment of the
age of majority which is eighteen years.
B. Insane or demented persons
However, contracts entered into during lucid
intervals are valid. Lucid interval refers to the
period of temporary sanity of an insane person.
C. Deaf-mutes who do not know how to write.
Contracts agreed to in state of
drunkenness or during a hypnotic spell are
voidable. This is so because consent given
in such states is not freely and
intelligently given.
A contract where consent is given through
mistake, violence, intimidation, undue
influence, or fraud is voidable. These five
are referred to as the causes that vitiate
consent or the vices of consent.
Vices of consent
Mistake
◦ When mistake will invalidate consent
a. If the mistake refers to the substance of the thing which is
the object of the contract.
b. If the mistake refers to those conditions which have
principally moved one or both parties to enter into the
contract.
c. If the mistake refers to the identity or qualifications of
one of the parties is such identity or qualifications have
been the .principal cause of the contract.
d. If the mistake refers to the legal effect of an agreement
when the real purpose of the parties is frustrated and the
same is mutual.
When mistake does not vitiate consent (BSA)
a) If the mistake refers to a simple mistake of
account which shall only be corrected
b) If the party alleging it knew the doubt,
contingency or risk effecting the object of the
contract.
 Rule when one party is unable to read or
does not understand the language of the
contract.
◦ If mistake or fraud is alleged, the person
enforcing the contract must show that the terms
thereof have been fully explained to the former.
Violence or physical coercion
◦ When violence vitiates consent
 There is violence when in order to wrest consent,
serious or irresistible force is employed. (S signed a
deed of sale of his land to B because B twisted and
threatened to break his arm if he refused to sign.
Consent here is given because of violence)
Intimidation or moral coercion
◦ When intimidation vitiates consent
 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.
Factors to be considered in determining the
degree of intimidation
◦ Age
◦ Sex, and
◦ Condition of the person.
When no intimidation exists
◦ No intimidation exists in case a threat to enforce
one’s claim through competent authority, if the claim
is just or legal.
Undue influence
◦ When undue influence vitiates consent
 There is undue influence when a person takes improper
advantage of his power over the will of another, depriving
the latter of a reasonable freedom of choice.
 Factors to be considered in determining the existence of
undue influence:
a. Confidential, family, spiritual and other relations of the
parties
b. Mental weakness
c. Ignorance,
d. Financial distress of the person alleged to have been unduly
influenced.
 Fraud (mrktg)
◦ When fraud exists (dolo causante)
 When, through the insidious words or machinations of one of the
contracting parties, the other is induced to enter into a contract
which, without them, he would not have agreed to.
 When there is a failure to disclose facts, when there is a duty to
reveal them, as when the parties are bound by confidential relations.
The fraud here is passive fraud.
 Requisites to make a contract voidable by reason of fraud
◦ The fraud should be serious
◦ The fraud should not have been employed by both contracting
parties.
 When no fraud exists
◦ In case of the usual exaggerations in trade, when the other
party had an opportunity to know the facts.
◦ In case of a mere expression of an opinion, unless made by an
expert and the other party has relied on the former’s special
knowledge.
◦ In case of misrepresentation by a third person, unless such
misrepresentation has created substantial mistakes and the
same is mutual.
◦ If the misrepresentation was made in good faith. However, the
same may constitute error.
Kinds of dolo or fraud
◦ Fraud in obtaining consent
 Causal fraud or dolo causante – fraud without
which consent would not have been given. It
renders the contract voidable.
 Incidental fraud or dolo incidente – fraud without
consent would have still been given but the person
giving it would have agreed on different terms. The
contract is valid but the party employing it shall be
liable for damages.
◦ Fraud in the performance of the obligation
Simulated contract, concept and kinds
Is one that does not intend to have any
legal effect on or a change in the juridical
situation of the parties. They are two
kinds:
◦ Absolutely simulated contract – one where the
parties do not intend to be bound at all.
◦ Relatively simulated contract – one where the
parties conceal their true agreement.