ESSENTIAL ELEMENTS OF CONTRACTS

ART 1318. There is NO CONTRACT unless the ff occur

1. Consent

2. Object

3. Cause

CONSENT (requisites)

1. must be manifested by offer and acceptance

OFFER – specific proposal to enter into an agreement w/ another

ACCEPTANCE – agreeing verbally or in writing

OFFER (requisite)

ART 1319. An offer must be intentional and certain

ex: when selling something, u should specify the object and price of being sold

SPECIAL CASES OF OFFERS

a. ART 1321. the person making the offer may fix the time, place, and manner of acceptance all of
which must be complied
b. ART 1322. An offer made through an agent (to act on your behalf) is accepted from the time
acceptance is communicated to him. (EXEMPTION)
c. ART 1323. An offer becomes ineffective upon the death, civil interdiction, insanity, or insolvency of
either party before acceptance is conveyed.
d. ART 1326. Advertisement for bidders are simply invitations to make offers.

ACCEPTANCE

I. ART 1319. An acceptance must be absolute (100% acceptance)

II. ART 1319. par 2 & 1322. Communicated to the offeror
III. may be express (really said) /implied (through action)

PROMISE BINDING PERFECTED CONTRACT

Unilateral promise unaccepted No None
(policitacion)
Unilateral promise accepted Binding if supported by Option contract only
consideration (option money)
Bilateral (both) promise Yes Binding contract of promise
2. ART 1327-1329. The contracting parties must possess the necessary legal capacity (allowed to enter into
contract)

2 KINDS OF INCAPACITY

1. Absolute incapacity (VOIDABLE)

a. unemancipated minors

 Except for contracts involving necessary

 Where minor misrepresented his age

b. insane or demented person

 Lucid interval

3. deaf-mutes who do not know to write

2. Relative incapacity (VOID)

a. those under Civil interdiction for transactions inter vivos

b. undischarged insolvents

c. husband and wife: cannot donate to each other, nor sell if the marriage is under ACP

3. ARTS . 1330-1346. It must be intelligent, free, spontaneous, and real (not vitiated)

VICES OF CONSENT ; (VOIDABLE)

 Violence
 Intimidation
 Mistake
 Fraud
 Undue influence

OBJECT Vs. CAUSE

EXAMPLE CAUSE FOR S CAUSE FOR B OBJECT

Contract of Sale S sells his land to B price delivery land
for 1M.
Contract of lease S leases his land to yearly rent of land use of land land
B for 10k per year

OBJECT

1. lawful

2. Actual or possible

3. transmissible

4. determinate or determinable
CAUSE

ONEROUS GRATITOUS RENUMERATORY

As to each of the contracting The service or benefit which is Mere liberality of the benefactor
parties is understood to be the remunerated
undertaking or the promise of the
thing or service by the other
party.

CAUSE (requisites)

1. Existing

2. lawful

3. true

CAUSE VS MOTIVE

X buys a gun from an arms dealer and procured the necessary permit

FORMS OF CONTRACT

Contracts classified according to perfection

1. Consensual
2. Real
3. Formal or solemn

Why contracts need to be in certain forms?

Needed for:

a. Validity of the contract

b. Enforceability of the contract
c. Convenience of the parties

CONTRACTS THEAT NEEDS TO BE IN CERTAIN FORMS FOR THEIR VALIDITY

CONTRACT FORMALITY
ART 748. Donation of property whose value exceed Must be in writing
P5000
ART 749. Donation of real property Must be in public instrument (offer & acceptance)
ART 1773 Partnership where immovables are Must be in public instrument w/ inventory of
contributed immovables contributed
ART 1874. Sale of piece of land or any interest Contract of agency must be in writing
therein through an agent
ART. 2134. Antichresis Must be in writing
ART 2140. Chattel Mortgage Must be registered
ART 2314.. Agreements regarding payment of Payment of interest must be in writing
interests in contracts of loans
CONTRACTS THEAT NEEDS TO BE IN CERTAIN FORMS FOR THEIR ENFORCEABILITY. ART. 1403 par. 2

CONTRACTS THEAT NEEDS TO BE IN CERTAIN FORMS FOR CONVENIENCE OF BOTH PARTIES. ART 1358

REFORMATION OF CONTRACTS

A remedy whereby a written instrument to the contract is amended to conform to the true intentions of the
parties

ART. 1359. (Requisites)

1. there is a valid contract (COC)

2. the written instrument does not conform the true intentions of the parties

3. the non-conformity is due to mistake, fraud, inequitable conduct or accident

CONTRACTS THAT CANNOT BE REFORMED

1. simple donations inter vivos (made during the lifetime of a person) wherein no condition is imposed

2. wills

3. when the real agreement is void

WHEN A PERSON CANNOT SEEK REFORMATION

ART.1367. A party who enforces the instrument representing the contract cannot subsequently ask for its
reformation.

WHO MAY SEEK REFORMATION?

ART. 1368. Reformation may be ordered at the instance of either or his successors in interest, if the mistake
was mutual; otherwise upon petition of the injured party, of his heirs and assigns.

INTERPRETATION OF CONTRACTS

Act of making intelligible that was not before understood, ambiguous, or not obvious

INTENTION ALWAYS PREVAIL

ART 1370. The intention of the parties always prevail over the words that appear in the instrument of a
contract.

ART 1371. In judging the intention, subsequent acts of parties are considered

ART 1372. However in general terms of a contract may be, they shall not be understood to comprehend
things that are distinct and cases that are different from those upon which the parties intended to agree.

ART 1373. If some stipulation of any contract should admit of several meanings, it shall be understood as
bearing that import which is most adequate render it effectual.
ART 1374. The various stipulations of a contract shall be interpreted together, attributing to the doubtful
ones that sense which may result from all of them taken jointly.

ART 1375. Words which may have different significations shall be understood in that which is most in keeping
with the nature and object of the contract.

ART 1376. The usage or custom of the place shall be borne in mind in the interpretation of the ambiguities of
a contract, and shall fill the omission of stipulations which are ordinarily established.

ART 1377. The interpretation of obscure words or stipulations in a contract shall not favor the party who
caused the obscurity.

ART 1388. When it is absolutely impossible to settle doubts by the rules established in the preceding articles,
and the doubts refer to the incidental circumstances of a gratuitous contract, the least transmission of
rights and interests shall prevail. If the contract is onerous, the doubt shall be settled in favor of the
greatest reciprocity of interests.

If the doubts are cast upon the principal object of the contract in such a way that it cannot be known what
may have been the intention or will of the parties, the contract shall be null and void.

DEFECTIVE CONTRACTS

VALID BINDING ENFORCEABLE

RESCISIBLE YES YES YES
VOIDABLE YES YES YES
UNFORCEABLE YES NO NO
VOID NO NO NO

RESCISSIBLE VOIDABLE UNENFORCEABLE VOID

WHY DEFECTIVE? Causes damage to Consent is Lack of authority Missing essential
3rd persons defective elements
CAN BE Yes Yes Yes No
RATIFIED(cure)?
APPLICABLE Art. 1381 Art. 1390 Art. 1403 Art. 1409
PROVISIONS
REMEDY TO AVOID Recession Annulment n/a n/a

RESCISSIBLE (ART. 1318 – 1389)

ART 1381.

The ff contracts are rescissible

1. entered into by guardians whenever the wards whom they represent suffer from lesion

2. agreed upon in representation of absentees, if the latter suffer from lesion.

3. those undertaken in fraud of creditors when the latter cannot collect the claims due them

4. those which refer to things under litigation if they have been entered into by the defendant w/out the
knowledge and approval of litigants or of competent judicial authority.
5. all other contracts specially declared by law to be subject to rescission

RESCISSIBLE CONTRACT VS RESCISSIBLE PAYMENT

ART. 1382. Payments made in a state of insolvency for obligations to whose fulfillment the debtor could not
be compelled at the time they were effected, are also rescissible.

RESCISSION

ART. 1383. The action for rescission is subsidiary; it cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation for the same.

EXTENT OF RESCISSION

ART. 1384. Rescission shall be only to the extent necessary to cover the damages caused.

FOR RESCISSION TO BE POSSIBLE . ART. 1385.

RESCISSION NOT POSSIBLE FOR CONTRACTS APPROVED BY COURT

ART. 1386. Rescission referred to in nos. 1 and 2 art 1381 shall not take place w/respect to contracts
approved by the courts.

CONTRACTS PRESUMED TO BE RESCISSIBLE . ART. 1387.

ACQUISITION OF 3RD PERSON IN BAD FAITH . ART. 1388.

PRESCRIPTION OF RESCISSION. ART. 1389.

VOIDABLE (ART 1390 – 1402)

WHAT ARE VOIDABLE CONTRACTS

ART 1390.

1. when 1 of the parties is incapable of giving consent (absolute incapacity)

Exception : when contract involves necessaries

Ex. Minor buying a food from a 25 yrs old. (exempted because food is necessary) VALID

2. when 1 or more vices of consent is present

a. VIOLENCE – in order to wrest consent, serious or irresistible (there’s no way of fighting back) force is
employed.

b. INTIMIDATION – when 1 of the contracting parties is compelled by a reasonable well-grounded fear.

Exemption : a threat to enforce one’s claim, if the claim is legal, does not vitiate consent.
c. MISTAKE – object, identification of a person, conditions that have principally moved one or both to enter
into the contract.

o Mistake of fact – whether it is mistake or not, it is still voidable

o Mistake of law – ART 3 ignorance of the law excuses no one from compliance. Not vitiate(NOT
VOIDABLE) consent.
EXEMPTION : Mutual mistake of law – ART 1334.

d. FRAUD -without insidious words or machinations, he would not have agreed to.

o DOLO INCIDENTE (incidental fraud) – employed after the perfection of a contract WILL NEVER
RESULT TO VOIDABLE CONTRACT.
o DOLO CAUSANTE (causal fraud) - employed before the perfection of a contract. WILL
RESULT TO VOIDABLE CONTRACT.

e. UNDUE INFLUENCE – when a person takes improper advantage of his power over the will of another.

VOIDABLE CONTRACTS ARE VALID UNTIL ANNULLED.

WHEN ANNULLMENT CANNOT PROCEED

1. when the object is lost through the fault of the person who may annul the contract

2. when the contract is ratified

WHO MAY ANNUL VOIDABLE CONTRACT

1. incapacitated person (upon ceasing of incapacity)

2. persons whose consent is vitiated

WHEN CAN IT BE ANNULLED? (prescribed)

1. within 4 years after incapacitated person ceases

2. within 4 years after intimidation, violence, or undue influence ceases

3. within 4 years from the time of discovery of mistake or fraud

ANNULMENT VS. RESCISSION

ANNULMENT RESCISSION
Used to invalidate a voidable contract Used to invalidate a rescissible contract
Principal remedy Subsidiary remedy
Is availed by parties to a contract Is availed by injured person even if not a party to
contract

WHO MAY RATIFY?

The party who can annul a voidable contract through orally, writing or may be implied.

UNENFORCEABLE CONTRACTS (ART. 1403 – 1408)

WHAT MAKES THE CONTRACT UNENFORCEABLE?

1. unauthorized contracts

EXEMPTION : When the principal ratified the sale

2. both parties are incapacitated

EXEMPTION : If both the capacitated ratified the contract.

3. transactions under statute frauds (orally)

To be enforceable, the ff should be in writing;

o Contracts not to be performed within a year

o A special promise to answer for the debt, default, or miscarriage of another
o Agreement in consideration of marriage
o Sale of personal property for P500 or more
o Lease of real property for more than 1 year
o A representation as to the credit of
o the third person
o Sale of the real property (ART 1358)

EXCEPTION : Partially executed contracts

VOID CONTRACTS (ART 1409 1422)