Civil Law Transcript - CONTRACTS

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CIVIL LAW REVIEWER - CONTRACTS 2014
January 11, 2013
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.
Atty. M does not agree with the definition of contract as stated in Art. 1305 because of the phrase
“between two persons”. It is more apparent than real. If Corrected, it should be “meeting of the mind
between two or more persons”.
Basic/cardinal principles in contracts
Article 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 is what we called freedom of liberty to stipulate.
However, there are limitations:

1. Must not be contrary to law
Ex. Asking someone to kill a person. Under Art. 48 of the RPC, killing a person constitutes
murder because of the qualifying circumstance of the consideration of price, reward or money. This is
not allowed for it is contrary to law.
2. Must not be contrary to public order
Public Order – something to do with the peace and tranquility of the community.
Ex. In a contract of lease. It was stated in the contract that if the lessee could not pay three
consecutive monthly rentals, debtor shall the right to use force to effect the ouster or removal of the
lessee. Can the contract take effect saying that there is liberty to stipulate?
ANS: NO! It will cause chaos. The purpose of the law is to secure order and peace in
humanity. Therefore, the contract is null and void because it is contrary to public order.
3. Must not be contrary to Public Policy
4. Must not be contrary to good customs
Customs – series of repeated act/s which has gain social and political approval.
Ex. Filipinas are bashful. If there is an agreement or contract between a man and a woman.
The woman will submit herself for 5 consecutive nights para magsinukdanay. This kind of contract is
illegal, immoral and unlawful because it is contrary to good customs.
1 2014 MOOT COURT Civil Law Committee: Arcales, Bacalso, Dacay, Damos, Dulosa, Duran,
Fernandez, Lesigues, Lucmayon, Malate, Marquez, Ocalrit, Oporto, Patac, Pelayo, Perolino, Po, Rivas, Salvador,
Trinidad, Valmoria, Villarino, Yangson, Yap
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5. Must not be contrary to Morals
Immoral does not refer to SEX. That is a wrong connotation.
Immoral – means distasteful, anything evil even without reference to sex.
Ex. If you are a congressman and you made a resolution so that you can give yourself a Christmas
gift. The people will then ask if is that moral for the legislators to pass a resolution in order to benefit
themselves. This is IMMORAL even without sex being involved.
Ex. When a woman agreed to submit herself to a man for 5 consecutive nights – please refer to
above example.
- the contract signed by them is immoral and therefore null and void.
If the agreement or contract falls into any of the five limitations, inevitably that contract is void.
Article 1308. The contract must bind both contracting parties; its validity or compliance cannot be left
to the will of one of them.
This is what we called MUTUALITY OF CONTRACTS.
If the other party is willing to pay, then consequently the other party should also part with the goods.
This is due to MUTUALITY or RECIPROCITY.
Article 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.
This is what we called PRINCIPLES OF RELATIVITY.
Q: Who are bound by the contract?
ANS: Contracts shall bind both contracting parties, their assigns and heirs. This is for stability
purposes.
Ex. If A and B signed a contract of lease then they are bound thereby. What if A is now dead but he
has children in the name of X and Y? Then X and Y will be bound to observe the contract entered into
by their predeceased father. It is not only by the contracting parties but also including their heirs.
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Q: When is a contract in which you are not a signatory yet it is binding upon you?
ANS: Answer is found in the second par. of Art. 1311. Stipulation pour atrui
1. Stipulation Pour Atrui – it is a contract conferring a benefit in favor of a third person who accepts
before it is revoked.
- it is a stipulation in a contract, clearly and deliberately conferred by the

contracting parties as a favor upon a third person, who must communicate his acceptance of the
favor or benefit to the obligor before it could be revoked. (Jurado’s definition)
Ex. PUJ has insurance. The contract of insurance is between the owner of the carrier and the
insurance company. In case of death or injury suffered while in transit or on board they shall be
entitled to an indemnity not exceeding 50,000. Who is now the beneficiary? It is now the passenger
even though he/she did not pay the premium of the insurance. If you are the passenger and you
suffered an accident you claim the indemnity even if you are not the contracting party or the insured
or the successor of the insured but because of stipulation pour atrui even if you are a stranger to the
contract. You may validly enforce that contract even if you are not a signatory to it.
Ex. In a contract of loan. Debtor owed the Creditor 100,000. Payable in monthly installments with
interest of 10%. Let us say that monthly periodic installment is 5,000 and the interest per month is
500 and shall be given to X who is a stranger. In a contract of loan, the parties are the debtor and the
creditor. X is not a party to the contract. X can enforce the contract even if he is not a signatory nor a
heir to either of the parties because this is a case of stipulation pour atrui which is conferring a benefit
to a third person who is not a signatory.
2. Where a third person induces a contracting party to violate his contract.(Art. 1314)
This results to prejudice to other party whose favor the contract is to be performed. If you are
the instigator then you will be the one liable for damages because of the inducement or instigation not
to comply with the contract. The other party(offended) has a right of action against the instigator.
Article 1314. Any third person who induces another to violate his contract shall be liable for damages
to the other contracting party.
3. Where a third person comes into the possession of the object of a contract creating a real right.
(Art. 1312)
Ex. There is a real estate mortgage over a parcel of land duly registered with the Register of Deeds. If
after the mortgage of the property I bought that property from the mortgagor owner. Even though na
prenda na nimo ang land you still own the land. It is only a security of your loan but you are still the
owner. The mortgagor-Debtor failed to pay and as a result the mortgage was foreclosed. Since the
mortgage was duly registered it is binding upon all persons. Therefore, the fact that you purchased it
is of no consequence because your right as a purchaser is subordinated to that of the mortgagee.
You purchase the property at your own risk. The reason why the mortgage was duly registered so
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that the right of the mortgagee can’t be defeated by any person whom may have interest subsequent
to the mortgage. Purpose of registration is to bind third persons.
Article 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 is what we called CONSENSUALITY OF CONTRACTS.
Classification of contract according to their perfection:
1. Consensual – those which are perfected by the mere agreement of the parties.
Ex. Partnership contracts
2. Real – require not only the consent of the parties for their perfection, but also the delivery of the
object by one party to the other.
Ex. Jewelry is to deposited in favor of a person this upcoming Monday because I’m going to
travel abroad. Saying that after 6 months I will come back and pay you for the safekeeping of my
jewelry. In this case, there is still no contract to speak of because a contract of deposit constitutes a
real contract and it is perfected only upon the delivery of the thing which is the subject matter of the
contract.
When the jewelries were already deposited then the contract is now perfected because it is the
delivery that gives rise to perfection.
Ex. Commodatum, deposit, pledge.
Perfection differs depending upon the kind of contract.
3. Formal – Those which require some particular form.
Ex. Donation, chattel mortgage.
Article 1159. Obligations arising from contracts have the force of law between the contracting parties
and should be complied with in good faith.
This is what we called OBLIGATORY FORCE or CHARACTER OF CONTRACTS.
It is because you can be sued if you will not honor the contract.
Article 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.
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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.
This is what we called the COGNITION THEORY.
If you have something to offer it must be DEFINITE and CERTAIN. If you are the buyer, then the
acceptance must be ABSOLUTE.
In a counter-offer….
Ex.
Buyer: Is the bag for sale? How much is the bag?
Seller: The bag is for sale and the price is 1,000
Buyer: Okay! I’m willing to buy the bag for only 800
Q: is the acceptance by the buyer to buy the bag for only 800 absolute?
ANS: NO! A qualified acceptance constitutes a counter-offer.
//Po
Meeting of the offer and acceptance
Illustration:
Seller offered to sell for P1,000.00 Purchaser refused Offer
Purchaser wants to buy it for P800.00 Seller refused 2014 MOOT COURT
Civil Law Committee: Arcales, Bacalso, Dacay, Damos, Dulosa, Duran, Fernandez, Lesigues, Lucmayon,
Malate, Marquez, Ocalrit, Oporto, Patac, Pelayo, Perolino, Po, Rivas, Salvador, Trinidad, Valmoria,
Villarino, Yangson, Yap Counter-offer/Qualified Acceptance
Seller offered to sell for P900.00 Purchaser refused 2 nd Offer
Seller then offered to sell for P800.00 Purchaser refused 3 rd Offer
Can the seller compel the purchaser to buy or pay?
Principles:
1. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the
cause which are to constitute the contract (Art. 1319)
2. Each and every offer and counter-offer are separate and distinct. Once an offer or counter-
offer is rejected, it is outright extinguished.
By the time the offers or counter-offers were rejected, they are outright extinguished. Therefore, there
was never any meeting of the minds. Thus, the seller cannot compel the purchaser to pay even
though the last offer was the same as that previously asked by the purchaser. There was no meeting
of the mind; therefore no perfection of contract to speak of. If there is no contract, no one can be
compelled.
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Acceptance made by letter or telegram
Illustration 1:
Jan 1: Letter offer made by S selling his car for P1M to P
Jan 5: Letter received by P, absolutely accepted such offer
Jan 5: Letter of acceptance sent to S
Jan 8: Letter of acceptance received by S
Is there a perfected contract?

Yes
When was it perfected?
Jan 8
Reason: Acceptance made by letter or telegram does not bind the offerer except from the time it
came to his knowledge (Art. 1319 2nd par.) Cognitive Theory [Acceptance concur only when the
offeror comes to know, and not when the offeree merely manifests his acceptance (as opposed to
manifestation theory)]
Illustration 2:
Jan 1: Letter offer made by S selling his car for P1M to P

Jan 5: Letter received by P, absolutely accepted such offer
Jan 5: Letter of acceptance sent to S
Sometime after the letter of acceptance was sent, P considered and decided not to buy
anymore so he sent a letter of revocation.
Jan 8: Letter of acceptance received by S in the morning
Letter of revocation received by S in the afternoon
Is there a perfected contract?

Yes
Principle:
1. Whichever communication received first is binding
2. Once acceptance is made, revocation cannot be unilaterally done
Reason: Since acceptance was received first, there was already a perfected contract. Revocation
cannot be unilaterally made. To effectuate revocation, it must be done in such a way that it would be
received before the acceptance. In the same way, the seller cannot also take back or revoke his offer
once acceptance is made. The seller must therefore communicate his revocation before he has
received the acceptance.
Comment: Should both the letter of acceptance and the letter of revocation be received
simultaneously, it would be a matter of evidence as to which letter was read first.
Query: The postmaster indicated the time of receipt of the letters. The revocation was received earlier
than the acceptance. However, what was read first was the letter of acceptance.
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Answer: Presumption of regularity of performance of duties. The basis would be the time indicated.
(?Should you claim otherwise, matter of evidence?)
Ineffectiveness of Offer (Art. 1323)
Circumstances:
1. Death
2. Insanity
3. Insolvency
4. Civil Interdiction
Who suffers:
Either offeror or offeree
When:
Before acceptance is made/Before perfection of contract
Illustration:
X is the offerer; Y is the offeree
Jan 1 : X offered his car
10 days to accept
Situation 1:
Jan 2: X died, became insane, got insolvent or suffered civil interdiction
The offer now becomes ineffective
Situation 2:
Jan 8: Y accepted
Jan 7: X died
The offer is ineffective even though there was acceptance on Jan 8 since X died before the perfection
of the contract
Situation 3:
Jan 8: Y accepted
Jan 9: X died
The contract has been perfected already on Jan 8, the offer is not affected by the death of X, since
the death took effect after perfection
Situation 4:
Jan 8: Y accepted
Jan 9: X died
Obligation: Personal obligation of which only X can do
There is perfection of contract on Jan 8 but the obligation was extinguished on Jan 9 upon death of X.
Should it be a real obligation or that which constitutes money, the obligation survives
//RIVAS
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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.
Example: Offeror (R), Offeree (E), car dealership
R offered to sell the car to E for 1.8m and gave E 10 days to decide. On the 10 th day, R
informed E that he is withdrawing the offer because there was a prospective buyer willing to buy for
1.9m. E protested saying that he was going to accept the offer since it’s still within the timeframe
given. Is R permitted to withdraw the offer despite acceptance of E within the 10-day timeframe? Is
there a perfected contract and therefore E can compel R to receive the money?
Yes, R can withdraw the offer since there was yet no acceptance. There is no perfected
contract since R has already withdrawn the offer before the acceptance of E. The acceptance was
only manifested after R has withdrawn the offer.
The offerer may withdraw the offer any time, provided:

1. There is yet no acceptance on the part of the offeree;
2. The offerer must communicate his withdrawal to the offeree.
Unless the option is founded upon a consideration, as something paid or promised.
In the given scenario, if E gave 10k to R (or promised R to give employment to R’s firstborn) in
consideration of the 10-day period, there would be a contract of option. A contract of option is one
where a certain party is given a definitive period of time to decide to buy or not a certain item.
On the 10th day, R communicated his withdrawal to E since there’s another person willing to
buy for 2m. Is R permitted to withdraw?
No. There would be breach of the option contract if R withdraws and E can claim for damages.
Contract of option is different from the contract of sale. The option money does not form part of the
purchase price. Neither can the option money be recovered because the offeree is enjoying the
period as a consideration for that money.
Art. 1335. Unless it appears otherwise, business advertisements of things for sale are not
definite offers, but mere invitations to make an offer.
When a reader (of a classified ad) calls the person who caused the advertisement, it does not
constitute acceptance but rather an offer to buy. The reader is therefore considered the offerer.
“Unless it appears otherwise” means that if the advertisement is so detailed that all the particulars are
given, then that is a definite offer. It depends on the manner of advertisement whether it should be
treated as a definite offer, e.g. all the material particulars of the thing for sale are given. If it only has a
general description, it is an invitation to make an offer.
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//Salvador
Pero’g ibutang nimo, model, color, palte number, type, chassis number, engine number, etc, that is a
definite offer for you to accept that’s the meaning of “unless it appears otherwise”, it simply means
that if the advertisement is so detailed that all the particulars of the thing offered for sale is already
given by way of information to the reader, treat that as a definite offer and therefore subject to
acceptance by the reader. If it’s merely general, e.g., “lot for sale with good neighborhood,” meaning
there are no details as to the thing offered, that’s an invitation to make an offer. If it is complete,
where the location, price, etc are placed, that’s a definite offer. Like, “I am accepting your offer for
10M”. So the idea is how you will advertise the thing for sale. General information minus the
particulars and details of the thing offered for sale, that is only an invitation to make an offer but if all
the particulars are already given, that is treated as a definite offer for the reader to accept giving rise
to a perfected contract.
Advertisement for Bidders
Ex. The Republic of the Philippines looks for a bidder. “Wanted Bidders: Construction of a third
Mandaue-Mactan Bridge.” Daghan kaayong gaapas for the 2.2B expansion of the airport.
So if you are the bidder, you will have to assess the following: expenses, prospective profit,
equipment, workforce.
Ex. There are 3 bidders for the construction. A-5B, B-4B, C-3B. To whom will the award be given?
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.
C says that “it should be awarded to us; we are the lowest bidder; gamay ra magasto gobyerno.” C’s
contention is not correct. They are simply invited to make a proposal. RP is not bound to accept the
highest or the lowest bidder. What if the bidder says “we have 1 hammer and 3 workers? So the
construction will take forever. So the advertiser wants to know what equipment the bidder has or the
number of workers who are to do the construction. The lowest bid or the highest bid is not the key
factor. So the advertiser is not bound to accept. So the import is we are merely inviting you to make
proposal to the government; we will select who is competent to be awarded the bid. So the
background is looked into. The phrase“unless the contrary appears”. If the advertisement says “the
project shall be awarded to the lowest bidder, we are duty bound to respect our turns(?) because it is
part of the terms and conditions.
Art. 1327. The following cannot give consent to a contract:

(1) Minors
(2) Insane or demented persons, and deaf-mutes who do not know how to write
So persons who are incapable of giving consent include

1. Minority
2. Insanity
3. Deaf-mutes who do not know how write
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1. Minority
Problem: who is incapable of giving consent?
Daughter: summa cum laude twice in college but only 15 years of age
Father: 50 year-old; attended for only two days in the first grade
Answer: Daughter is incapable of giving consent, as she is still a minor. 15 is below 18. It must be
based not upon intelligence. Minors are not yet capable of receving correct impressions of facts in the
contract he is entering into. The result is contract is voidable.
2. Insanity
Why should not we enter into contracts with the insane? They are not aware of what they are doing.
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.
Lucid interval is a point in time when an insane person temporarily regains sanity. So contracts
agreed upon during lucid interval are valid.
3. Deaf-mutes who do not know how to write (should have been to read and write according to
Mayol)
You’re incapable of giving consent if you don’t know how to write. If you know how to read, you’re
capable. Naay tawo kusog kaayong mosulat; nindot kaayog agi pero pabasahon “ahh ah ah” so di
kabaw mobasa. So capable ka. Pero if di ka kabalo mosulat but kabalo ka mobasa, incapable ka. If
kabalo ka mobasa, capable ka kay the contract is understood by reading. If you’re able to read,
capable ka. You’re capable of understanding the contents of the contract. It understanding the
contract by reading not by writing. Knowing how to read means u understand the contract you are to
sign. (murag najumble ni ni sir)
4. State of Drunkenness
When you’re drunk your inhibitions are removed. That why drunkenness is equated to temporary
insanity. But the problem here is this, how do we know if he’s drunk? In US, the alcoholic content will
be registered in the gadget. In here, it is only by observation mao nang malangay kay mahimu man
tang mu-rason. Pananglitan magsapid imung dila – “di oi, yungit ku’s pagkabata”
5. State of Hypnotism
In bisaya, gilamat. Example, look at me, tutuki ning singsing. While in that state, you are dictated
what to do – you dance. Then the one who was told, will follow what he/she is told. If your hypnotized,
your acting upon the instruction of the other person, not of your own volition. so its possible that you
signed a contract to which you did not know but were only ordered to do so because you are not in
your own state of mind but upon the power of the other person who hypnotized you.
- Minority, insanity, deaf mute who does not know how to write, person under state of drunkness
and person under state of hypnotism. Common denominator, incapable of giving consent. If
they signed the contract not withstanding incapacity to consent. What is the effect? How do
you characterize the contract if one of the contracting parties is incapable of giving consent?
Voidable. If one. But if both are insane or minor, that is unenforceable. If both of the
contracting parties, that is unenforceable.
- So there are two groups of voidable contracts.
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o 1. Where one of the contracting parties is incapable of giving consent

o 2. Capable this time, but it is vitiated by intimidation
- So, mub-a nalang
o 1. Incapacity to consent
o 2. Vitiated consent
o So the result, both are voidable contracts.
- For Example (Art 1335), you were made to sign a contract or else it is your last day to live. So
what is it class? It is intimidation. It is not your will. Pwerte nimung hadluka.
- Art 1335. Xxx 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
xxx
o By the way, intimidation does not only mean that you were personally intimidated. E.g.
“Juan dela Cruz permahi ni” “Di ko” “Kani imung asawa amu ning kidnapun”
 The threat is addressed not to the party but to the wife of the party, apil ban a?
yes. Basta intimidation.
 Xxx the spouse, descendants or ascendants
o The intimidation is very broad, it could be addressed to the contracting party, spouse of
the contracting party, descendants or ascendants.
//Trinidad
- END OF DAY 1 –
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January 18, 2013
Causes of vitiated consent

1. Minority
2. Insanity
3. Agent not authorized
4. State of drunkeness
5. State of hypnosis
6. Violence
7. Mistake or error
Article 1331. In order that mistake may invalidate consent, it should refer to the substance of the
thing which is the object of the contract, or to those conditions which have prinicipally moved one or
both parties to enter into the contract.
Example:
In a scenario where the buyer asked for the price of a white car far from him, the dealer answered
while not looking at him nor at which the buyer was pointing to, saying it is for P820,000. The dealer
thought the buyer wanted the red car which was nearer to him.
Agreeing to the price, the buyer decided to purchase the car. The dealer then told him to return the
next day while leaving his personal details so the dealer could prepare the Deed of Absolute Sale.
When the buyer returned the next day, he wondered why the car had a different color. The confusion
became clearer when the dealer tried to clarify which car was the buyer refering to the previous day.
The dealer was indeed referring to the red car, instead of the white car.
There was then no meeting of the minds between the two parties. The remedy given by law is
annulment. This is a case of MISTAKE.
What if one of the other parties want to prove that there was no mistake in the making and signing of
the contract?
Artice 1332 provides: “When one of the parties is unable to read, or if the contract is in a language
not understood by him, and the mistake or fraud is alleged, the person enforcing the contract must
show that the terms thereof have been fully explained to the former.”
It is therefore incumbent on the person enforcing the contract to show that he fully explained the
terms with the other party who alleges mistake or fraud.
What if there is simple mistake of account?

Last paragraph of Article 1331 provides: “A simple mistake of account shall give rise to its correction.”
Example:
Where in the abovestated scenario, the car was bought at P820,000. But in the Deed of Sale, the
amount appeared to be P82,000 only. The remedy should not be annulment of the Deed but merely
correction. Simply add the missing zero and sign above the correction. You should not disregard the
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contract itself since it is not the principal object of the contract. It is only the document that needs
correction. The same holds true when there is just an error in the arrangement of the pages.
It should be the very object of the contract that should be at issue to warrant an annulment, not in
other cases where a correction would suffice.
Article 1335. There is violence when in order to wrest consent, serious or irresistible force is
employed.
When there is violence, there is physical contact.
Example:
Juan’s arms were twisted in excruciating pain in order to secure his signature. Here, violence is said
to exist.
Next paragraph of Article 1335:

“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.”
Here, there is no physical contact involved. There is merely moral compulsion. There could probably
be pointing of a gun or knife towards you, but there is really no physical contact involved. There is
merely moral coercion.
The said paragraph is very broad as it can involve not only the person or property of the contracting
party, but also the person of properties of his spouse, descendants or ascendants.
Example:
Jose was made to sign a document. He was forced to sign the same when Pedro threatened to
kidnapped his wife along with Pedro’s four other friends.
Here, the intimidation is not limited to Jose’s person, but also to his wife. Intimidation still exists in this
scenario.
How about if it involves the threat of destroying the property of your grandfather, is it still intimidation?
Yes, it is provided in the Article.
In violence also, the law requires that the same be serious or irresistible.
What if intimidation is employed by a third person hired by one of the contracting parties, is this
covered by Article 1335?
Yes, this third person employed acted by one of the contracting parties acted on his behalf. Article
1336 provides:
“Violence or intimidation shall annul the obligation, although it may have been employed by a third
person who did not take part in the contract.”
Article 1337. 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.
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Example:
A janitor was forced to sign a document by his manager. Fearing that he would lose his job, the
janitor signed.
When is an act considered intimidation or undue influence?

In undue influence, rank or position or office is being used in order to influence the other party to sign.
There has to be this relationship between a superior and a subordinate. Compared to intimidation,
rank, office or position is not necessary to perpetrate the act. There is only guts and the courage to do
the intimidation.
Mayol:
Even if there seems to be intimidation, but there exists unequal footing between the two parties such
that one is superior to the other, the scenario is one of undue influence and not of intimidation.
Article 1338. There is fraud when, through 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.
Fraud is very common class. There is fraud employed especially when it is used by the other party in
securing the consent of the other. This is causal fraud where the use of insidious words and
machinations by one of the contracting parties to induce the other party to enter into a contract. The
contract here is voidable.
Incidental fraud gives rise to damages while the contract remaining to be valid.
What happens to the contract?

The contract is voidable. It gives rise to the remedy of annulment.
However, when fraud is made in the performance of the contract, annulment is not proper. This only
gives rise to damages.
Example:
Pedro sells a watch which he claims to be solid gold to Juan. Juan believing in Pedro’s words bought
the same. Juan however later learned that it was just a gold plated watch. Here, there is causal fraud
where annulment is proper. The reason is that there is already absence of meeting of minds.
If the contract involved the delivery of 10 imported wines however only 8 were really imported and 2
were made locally. Here, there is merely fraud in the performance of the contract which is a valid
source for damages only.
Misrepresentation in GOOD FAITH is NOT fraudulent and merely constitutes error.
Example:
Jose believing his watch to be solid gold sold the same to Helen. Here is misrepresentation in good
faith since Jose did not know that the watch was merely gold plated and had no knowledge of any
defect with the watch. He only relied on the misrepresentation of the previous seller believing that
such was true.
Is the contract voidable?
2013-
Article 1343 provides:

Misrepresentation made in good faith is not fraudulent but may constitute error.
Mayol:
Yes, the contract may be annulled but the ground is NOT on fraud but ERROR. Error is the false
believe in something. Hence, there can be no fraud if there is good faith. In this case also, it is
required that the error be SUBSTANTIAL. The circumstances of the case would be taken into
consideration in order to determine the gravity of the error.
In the given case, the seller was made to believe that watch is of higher quality. The value of a solid
gold watch vis-à-vis a gold plated watch is substantial.
Simulation is the process of creating the appearance of a contract which really does not exist or
different from what was intended.
Example:
A deed of donation of a parcel of land was executed, when in truth, a contract of sale is really
intended by the parties.
Which contract are the parties then bound?
Last line of Article 1346 provides: …binds the parties to their REAL AGREEMENT.
Hence, the parties are bound to the contract of sale and not to the simulated contract of donation.
Article 1346. An absolutely simulated or fictitious contract is void. A relative simulation, when it does
not prejudice a third person and is not intended for any purpose contrary to law, morals, good
customs, public order or public policy binds the parties to their real agreement.
Mayol:
This law is intended to penalize parties for their deception.
Therefore, the parties should be placed in estoppel and should not be allowed to change the tenor of
the contract. If they made it appear to be a donation, then for all intents and purposes, the same
should push thru along with its consequences, beneficial or not. Or else, you will be helping the
parties in realizing their act of deceiving others.
Not all things can be the subject of a contract.
Article 1347. All things which are not outside the commerce of men, including future things, may be
the object of a contract. All things which are not intransmissible may also be the object of contracts.
Article 1348. Impossible things or services cannot be the object of contracts.
Mayol:
The object of contracts can be things (subject to the conditions given in 1347 & 1348), services and
rights.
//Valmoria
SECTION 2. - Object of Contracts
2013-
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.
Art. 1348. Impossible things or services cannot be the object of contracts.
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.
**
What can be the object of a contract?
1. Things – those which are within the commerce of man (can be the object of a given contract)
2. Services – those which are legal, lawful and possible
3. Rights – those which are transmissible
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.
Art. 1351. The particular motives of the parties in entering into a contract are different from the cause
thereof. (n)
**
Motive as distinguished from Cause
1. M: not an element of a contract
C: an essential element of a contract
2. M: even without motive a contract is still valid
C: a contract without cause or with an unlawful cause is void (Art 1354)
3. M: generally unknown
C: always known
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.
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.
**
2013-
This provision was not interpreted in this manner in the case of Concepcion vs. Tan. Rather, a
contract with a false cause shall render the contract VOIDABLE, which is valid until annulled.
Atty. Mayol’s explanation: The provision under Art. 1353, is inconsistent with our learning about
contracts because no void contract can ever be valid. If we follow Art. 1353, it means that a void
contract may still be valid for as long as it can be proved that such contract is founded upon another
cause which is true and lawful. This is inconsistent with the rules, hence, to make it consistent, a
contract with a false cause shall render the contract VOIDABLE, because in the case of a voidable
contract, it is still considered as a valid contract until it is annulled. This is the principle applied by the
SC in the case of Concepcion vs Tan.
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.
**
Example: For and in consideration of P1M, I hereby transfer, sell and convey this ____________.
In case the document or contract is incomplete, what is not stated therein is supplemented by this
provision. Therefore, if the cause is not stated, it is presumed that it exists and that it is lawful. It is still
valid by reason of the presumption.
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.
CHAPTER 6
RESCISSIBLE CONTRACTS
Art. 1380. Contracts validly agreed upon may be rescinded in the cases established by law.
**
Kinds of Defective Contracts:
1. Rescissible
2. Unenforceable
3. Voidable
4. Void
Art. 1381. The following contracts are rescissible:
(1) Those which are entered into by guardians whenever the wards whom they represent
suffer lesion by more than one-fourth of the value of the things which are the object thereof;
**
Example:
2013-
W - ward
G – guardian
G entered a contract of lease with R for P7,000. FMV for lease purposes is P10,000. Did W suffer a
lesion from the contract? Yes, P3,000. How much lesion must be suffered by W in order that the
contract may be rescinded? More than ¼ of the FMV, hence, more than P2,500 (10k/4=2.5k).
In the instant case, W may have the contract rescinded since the lesion of 3k is more than ¼ of the
10k value. However, had the lease been for P7,500, making the lesion exactly P2,500, can W rescind
the contract? The answer NO, since the law says it must be more than ¼ of its value.
(2) Those agreed upon in representation of absentees, if the latter suffer the lesion stated
in the preceding number;
**
Example:
One hectare land commonly owned by deceased parents with 2 children, B and L. B’s whereabouts
have been unknown for a long time. L had the land rented out for P6,000. When B finally showed up
and wanted to take part in her share of the property, she wanted to increase the rent to P10,000 since
it is the FMV.
Can she have the contract rescinded? Yes. Even those which were validly agreed upon? Yes. The
right to rescind is anchored on prejudice caused to the absent party.
//Yap
- END OF DAY 2 -

Civil Law Transcript - CONTRACTS

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2013-

CIVIL LAW REVIEWER - CONTRACTS 2014

January 11, 2013

Basic/cardinal principles in contracts

This is what we called freedom of liberty to stipulate.

However, there are limitations:

2. Must not be contrary to public order

3. Must not be contrary to Public Policy

4. Must not be contrary to good customs

5. Must not be contrary to Morals

Immoral does not refer to SEX. That is a wrong connotation.

Immoral – means distasteful, anything evil even without reference to sex.

This is what we called MUTUALITY OF CONTRACTS.

This is what we called PRINCIPLES OF RELATIVITY.

Q: Who are bound by the contract?

- it is a stipulation in a contract, clearly and deliberately conferred by the

This is what we called CONSENSUALITY OF CONTRACTS.

Classification of contract according to their perfection:

Ex. Partnership contracts

Ex. Commodatum, deposit, pledge.

Perfection differs depending upon the kind of contract.

3. Formal – Those which require some particular form.

Ex. Donation, chattel mortgage.

This is what we called OBLIGATORY FORCE or CHARACTER OF CONTRACTS.

This is what we called the COGNITION THEORY.

ANS: NO! A qualified acceptance constitutes a counter-offer.

Meeting of the offer and acceptance

Can the seller compel the purchaser to buy or pay?

Acceptance made by letter or telegram

Is there a perfected contract?

Jan 1: Letter offer made by S selling his car for P1M to P

Is there a perfected contract?

Ineffectiveness of Offer (Art. 1323)

Example: Offeror (R), Offeree (E), car dealership

The offerer may withdraw the offer any time, provided:

Unless the option is founded upon a consideration, as something paid or promised.

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

So persons who are incapable of giving consent include

o 1. Where one of the contracting parties is incapable of giving consent

January 18, 2013

Causes of vitiated consent

What if there is simple mistake of account?

Next paragraph of Article 1335:

When is an act considered intimidation or undue influence?

What happens to the contract?

Misrepresentation in GOOD FAITH is NOT fraudulent and merely constitutes error.

Article 1343 provides:

SECTION 2. - Object of Contracts

Art. 1348. Impossible things or services cannot be the object of contracts.

SECTION 3. - Cause of Contracts

Art. 1381. The following contracts are rescissible:

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